Without A Paddle

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What's going on?

Governments and central banks are putting their backs into yet more measures that’ll hopefully keep the global economy afloat on this suspicious-looking creek.

What does this mean?

Three major central banks each took their turn in the spotlight. First, the European Central Bank (ECB) announced it’d buy more than $800 billion worth of bonds in an effort to slash the cost of borrowing for eurozone governments and companies and, in turn, encourage spending. The Bank of England, meanwhile, announced billions of dollars worth of its own bond purchases, and threw in a second emergency interest rate cut for good measure. That brings its benchmark rate to just 0.1% – the lowest in its 325-year history.

Across the Atlantic, the US Federal Reserve took steps to support popular “money-market funds”, which investors have been selling off recently despite the funds’ low-risk reputation. Not to be left out, the country’s government then laid out details of the cash payments – of $1,000 per adult and $3,000 for a family of four – it plans to send all Americans.

Why should I care?

For you personally: No such thing as free money.
Our American Finimizers may well end up with a tasty $1,000 in their checking account within weeks – and possibly another grand further down the line. That’s nothing to sniff at in these troubled times. Of course, these deposits – as well as the proposed tax cuts – will need to be paid for eventually. One way the government’s reportedly considering doing that: offering up 50-year bonds for the first time.

For markets: Witch, please.
While recent efforts from central banks and governments have been met with shrugs, European bond investors initially welcomed the ECB’s plans on Thursday, and prices of Italian, Spanish, and Portuguese bonds all rallied (tweet this). And some think that bullishness could continue into Friday if the regular end-of-quarter expiration of stock market options – a process known as “witching” – forces a large number of investors to close their bearish “short” bets.

Originally posted as part of the Finimize daily email.

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