US stocks staged their biggest advance in more than five years on Tuesday and Asian stocks soared on Wednesday  after the Federal Reserve took its most radical step yet to boost financial markets’ liquidity, backed by smaller moves from other central banks. In its second big intervention in three trading days, the Fed announced it would lend primary dealers in the bond market $200bn in Treasury securities for a month at a time and accept ordinary triple-A rated MBS as collateral in return. The FT’s editorial comment summed up the consensus view in Wednesday’s press: “Though the Fed is right to try, its latest action is unlikely to have much effect.” Lex is more pessimistic, noting that a “massive deleveraging is underway and likely to continue” as assets undergo a necessary repricing. Read the Fed’s and other central banks’ statements here .

This entry was posted by Gwen Robinson on Wednesday, March 12th, 2008 at 5:41 and is filed under Capital markets. Tagged with federal reserve. Edit this entry.