Fed could boost corporate bond purchases if volatility persists - Citi

Analysts at Citigroup said last week that the US Federal Reserve (Fed) might ramp up its purchases of corporate bonds if stocks and corporate debt markets witness heightened volatility. 

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Investors will be watching the Fed’s response to Thursday’s sharp sell-off in risk assets; the Fed could decide to marginally ramp up purchases in the days ahead to reassure the market. 

Renewed deterioration in market conditions could prompt the central bank to increase corporate debt purchases, as it did in June when stocks dropped 7% from June 8 to June 11 and investment-grade credit spreads widened 17 basis points to 161 basis points.

The Dow Jones Industrial Average fell 800 points on Thursday, as big tech shares such as Apple and amazon retreated sharply from dizzying heights. Stocks regained some poise on Friday after better-than-expected jobs data and were closed on Monday on account of Labor Day holiday.