Congress allocated $454 billion in equity to backstop the Fed loans as part of the more than $2 trillion economic relief package passed in March. The secondary market facility is the first Fed program using funds from the stimulus law to get going. Fed officials first announced the creation of the corporate credit facilities on March 23. . .
https://www.bloomberg.com/news/articles/2020-05-12/fed-says-it-will-begin-purchasing-corporate-debt-etfs-on-tuesday
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https://www.bloomberg.com/news/articles/2020-05-12/fed-says-it-will-begin-purchasing-corporate-debt-etfs-on-tuesday
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WATCH: The Fed said a facility designed to purchase eligible corporate debt from investors will launch today.
The reserve bank also posted to its website the investment management agreement with BlackRock, the asset-management giant it’s retained to administer the program. The document offered more information on the strategy the Fed would pursue.
Corporate-debt buying, including via ETFs, will occur in three stages, according to the agreement:
- a “stabilization” phase
- an “ongoing monitoring” phase, and
- a “reduction in support” phase.
“Purchases will be focused on reducing the broad-based deterioration of liquidity seen in March 2020 to levels that correspond more closely to prevailing economic conditions,” the document said. It listed an array of metrics that would guide investments, including transaction costs, bid-ask spreads, credit spreads, volatility and “qualitative market color.”
The corporate credit facilities are among the nine emergency lending programs the Fed is rolling out to help cushion the blow to the U.S. economy from the pandemic and keep credit flowing. They mark a dramatic escalation of the central bank’s interventions in financial markets by stepping into corporate debt -- potentially including the purchase of some sub-investment grade securities -- for the first time since the 1950s.
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Fed Says It Will Begin Buying Corporate-Debt ETFs on Tuesday
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Updated on
- U.S. central bank launches long-awaited backstop for companies
- Fed outlines strategy including three phases for ETF purchases
