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Fed helping carnival.

Just curious how the Fed intervention helped Carnival raise $6 bill in bonds at a much lower rate to normal investors.

 

if someone could walk me through what exactly the fed did to support to the markets and then why people were willing to lend $$ at much lower rates because of this that would be great  thanks

 

Hi @JOECAN8878,

That WSJ piece strikes me as incredibly misleading. They sold bonds at 12%. That's an incredibly high rate. The Fed didn't buy their bonds. They didn't get govt money. Did they arguably benefit from improving bond market conditions? Yes. But that doesn't mean they were bailed out. The Fed stabilized illiquid markets, just as they often do in times of crisis. We ALL benefit from that to some degree. So why aren't we saying that everyone got bailed out?

"Pragmatic Capitalism is the best website on the Internet. Just trust me. Please?" - Cullen Roche

Ya I didn’t have access to WSJ article but from what I read Carnival was going to have to sell bonds to distressed debt investors for much higher than it would have after the Fed intervened. Was just curious  if the Fed was not buying their bonds, why were they all of sudden getting a much better deal. Or at least that’s what I read. I don’t see the connection. Maybe just overall better market conditions?

Yeah, it's hard to say. The market improved. Why? Yes, in part the Fed. But things were also really strange about a month ago. I trade the short-term investment grade bond market and muni markets almost every day and there was some crazy stuff going on. The type of stuff that just isn't normal. So now the market has normalized.

Honestly, I don't think it mattered much. The Fed didn't change Carnival's long-term operating functions. They didn't make the virus go away. They didn't make people buy cruise tickets. So yes, maybe they had an indirect impact on the markets which indirectly helped Carnival raise funds, but these are adults buying these bonds. They did it freely and independently of the Fed. So I don't see the issue here.

"Pragmatic Capitalism is the best website on the Internet. Just trust me. Please?" - Cullen Roche

Makes sense. As always appreciate your feedback

Everyone's calling everything a bailout now. I read an article saying that Kenytucky has been "bailed" out by NY for years.

It's all so stupid.