Bank of America Merrill Lynch Global Research discusses the Fed's new Tbill purchase program and notes that it is similar to QE, and should have similar impacts for markets and financial conditions.
"After the repo market fireworks of September, the Federal Reserve announced a new program of Tbill purchases to increase the amount of reserves in the banking system. The Fed has made an effort to inform markets that this is not a new round of quantitative easing, but in important ways it is similar," BofAML notes.
"We would argue that the Fed's Tbill purchase program delivers on both fronts and is therefore similar to QE, but without the important element of forward guidance. The upshot is that (1) the Fed is continuing to "ease" even though rate cuts are now on hold, which is supportive of growth, higher interest rates and higher equities, and (2) the Fed is loosening financial conditions by increasing the availability of, and lowering the cost of, leverage, which broadly supports asset prices potentially at the cost of increasing systemic financial risk," BofAML adds.