The stock market gets off to a positive start, lifted by news that the
Fed is taking action to address liquidity issues in the corporate
short-term borrowing market. Still, early gains do not come close to
making up Monday's plummet of nearly 4%.
The Fed created a Commercial Paper Funding Facility (CPFF), which will
provide a liquidity backstop for the strained commercial paper market.
The Fed will purchase three-month unsecured and asset-backed commercial
paper from eligible issuers. The Fed did not give a dollar amount on
size of the CPFF. The commercial paper market, which banks and U.S.
corporations rely on for short-term borrowing, has been under pressure
as investors flocked to the safety of Treasuries and away from money
market funds.
As stocks advance, Treasuries decline as news of the CPFF encourages
investors to take risks. The 10-year note is down 28 ticks, sending
its yield up to 3.56%. The 3-month bill yield climbed 26 basis points
to 0.75%.