This Is Not QE; Focus on the Fundamentals
Comment of the Day

March 20 2023

Commentary by Eoin Treacy

This Is Not QE; Focus on the Fundamentals

Thanks to a subscriber for this report from Morgan Stanley which may be of interest. Here is a section:

Eoin Treacy's view

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Crisis-era swap lines were reopened over the weekend to ensure Europe has sufficient liquidity to deal with its unfolding banking crisis. Credit Suisse will not be the only bank caught on the wrong side of bonds with negative yields suddenly having positive yields.

The Fed’s balance sheet jumped last week in response to the actions to support the US banking sector. While this is not technically QE, it is certainly confidence boosting. The conclusion is clear. If they are willing to unwind half of the quantitative tightening program to deal with the collapse of several mid-sized banks, what will they do when unemployment rises and earnings roll over?  

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