The Federal Reserve announced a large-scale second wave of initiatives to support the US economy, including buying unlimited bonds to keep borrowing costs low and creating loan guarantee programs for corporations and state and local governments.

Intervention in the corporate bond market is an unprecedented move for the Fed, although central banks elsewhere have taken similar measures in recent years to support liquidity conditions for companies.

The measures taken underline the magnitude and extent of the difficulties caused by the coronavirus after large parts of the economy were forced to cease operations to curb the infection. Despite their efforts, they failed to revive investor optimism on Monday.

The Federal Reserve will buy government bonds and mortgage-backed securities “in the amounts necessary to support the smooth functioning of the market and the effective implementation of monetary policy by the economy”.

A week ago, the Fed announced it would buy at least 500 billion USD in government bonds and 200 billion USD in mortgage-backed securities. The new Fed programs also include incentives directly targeted at helping employers and households, as well as cities and states.

The Fed also announced it will support “the flow of credit to employers, consumers, and businesses by creating new programs that together will provide up to 300 billion USD in new funding”.