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Fed Extends Lending Facilities Through Year-End

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While markets wait for Congress to finalize another economic relief bill days before many benefits expire, the Federal Reserve has announced it will extend all its pandemic-enacted lending facilities through the end of the year. They were due to expire around Sept. 30.

“The three-month extension will facilitate planning by potential facility participants and provide certainty that the facilities will continue to be available to help the economy recover from the COVID-19 pandemic,” according to the Fed statement.

The extensions apply to the Fed’s Primary Dealer Credit Facility, the Money Market Mutual Fund Liquidity Facility, the Primary Market Corporate Credit Facility, the Secondary Market Corporate Credit Facility, the Term Asset-Backed Securities Loan Facility, the Paycheck Protection Program Liquidity Facility, and the Main Street Lending Program. 

The Municipal Liquidity Facility and Commercial Paper Funding Facility did not require any extension since the first was already set to expire on Dec. 31 and the latter has an expiration date of  March 17, 2021. 

The Fed, whose policymakers began a two-day meeting on Tuesday, notes in its announcement that all its “lending facilities have provided a critical backstop, stabilizing and substantially improving market functioning and enhancing the flow of credit to households, businesses, and state and local governments.”

Financial markets agree. Since late March U.S. stocks have recovered about 90% of their February-March 30%-plus decline and liquidity has been restored in the corporate bond market and their spreads have narrowed.

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