Federal Reserve publishes its 2020 financial stability report

• warns financial sector vulnerabilities likely to be significant in near-term
• pandemic strains on household and business balance sheets likely created fragility’s that last for some time
• warns banking sector may experience strains as a result of economic and financial stocks
• Banks so far have been able to meet demand for credit line drawdowns while adding to loan-loss reserves
• some hedge funds have been severely affected by large asset price declines and volatility, contributing to market dislocations
• primary dealers struggled to provide intermediation services at peak stress periods
• asset prices subject to significant declines if pandemic worsens
• funding markets were less fragile than in financial crisis but still suffered strains required Fed intervention
• high levels of business debt likely to make economic fallout from pandemic worse
• pandemic poses severe risk to businesses of all sizes and millions of households
• pandemic to cause a sharp rise in defaults on household debt
• market debt for long dated treasuries and treasury futures in March fell to record low and has shown only modest improvements since
• mortgage servicers under strain from forbearance could lead to less mortgage credit and some failures in the future
• further dollar appreciation could put additional strains on US firms that rely on exports and supply chains in their operations
• Covid 19 risks, a no deal Brexit, still poses risks to European and US financial systems