Market Graphic - The Fed's firebreak

Banc of America Securities predicts the US Federal Bank's actions will lower the risk of further crises for investment banks, while also changing the regulatory landscape

The Fed's firebreak should hold, as at the core of the Bear Stearns collapse was a failure in the repo market. The Fed's extension of immediate financing to brokers for a broad range of collateral significantly reduces the potential for a replay of a Bear Stearns scenario, in our view. Additionally, the Fed's action clearly shows a preference for debt-friendly solutions; hence, we would expect credit spreads to decouple significantly from equity prices in the future.*

A new financial order: de