Making Corporate Debt Zombies Great Again, Part 2

As we indicated in Part 1, the Fed’s corporate bond buying program is a dream come true for Wall Street speculators. After years of learning to front-run whatever the Fed is buying in the Treasury and GSE markets, speculators now know the exact corporate bond index and its company-by-company weightings that the Fed will attempt to replicate in its purchase activity pursuant to the SMCCF.

That is to say, if speculators are smart enough to pour piss our of a boot by reading the directions on the bottom, they can’t miss making a killing by buying the bonds of Boeing, for example, which will have a 1.2% weighting in the Fed’s SMCCF portfolio; and for which front-running purchases can be funded on virtually zero cost repo, another gift from the Fed.



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