The Fed Begins Its Corporate Bond Buying Program Today as Part of a Plan to Stabilize Credit Markets

Back in March 2020, the Fed had announced a plan to engage in the purchase of corporate bonds as part of its pandemic response to help stabilize credit markets. On May 11, 2020, the Federal Reserve Bank of New York announced that “the Secondary Market Corporate Credit Facility (SMCCF) [would] begin purchases of exchange-traded funds (ETFs) on May 12.”

Per its April 9, 2020 term sheet, the “SMCCF may purchase U.S.-listed ETFs whose investment objective is to provide broad exposure to the market for U.S. corporate bonds. The preponderance of ETF holdings will be of ETFs whose primary investment objective is exposure to U.S. investment-grade corporate bonds, and the remainder will be in ETFs whose primary investment objective is exposure to U.S. high-yield corporate bonds.” (See N.Y. Fed Statement). The Primary Corporate Credit Facility is expected to become operational in the “near future.”