While the capital markets have been disjointed since the outbreak of COVID-19, the Federal Reserve has done an excellent job stabilizing the markets and has continued to keep the market liquid throughout this disrupted period.
In early April, the Federal Reserve announced that it would provide $2.3 trillion to support the U.S. economy. Part of this support initially came in Fed purchases of corporate bonds and the acquisition of agency mortgage-backed securities. More recently, the Fed has provided liquidity to the CMBS market. “The Fed resurrected its financial-crisis liquidity program on to the market dislocation triggered by the pandemic.” (Commercial Mortgage Alert, 7/10/2020.)
The Fed’s actions have resulted in liquidity in most segments of the commercial real estate finance market. Overall, the recovery environment has remained liquid and interest rates are still at all-time lows. Fed Chairman Jay Powell and Treasury Secretary Steve Mnuchin have taken actions throughout this period that have helped stabilize the market. In particular, Powell’s assurance that “we will not run out of ammunition” has positively influenced the mood of the market as a whole.