Photo credit: Andrew Harrer / Bloomberg
Photo credit: Andrew Harrer / Bloomberg
The Federal Reserve bought bonds issued by companies that include AT&T Inc., UnitedHealth Group Inc. and Walmart Inc. as part of its emergency loan program established in response to the pandemic, according to new disclosures.
On June 16, the US central bank began buying securities from individual issuers as part of a broad index it created to include companies that were eligible for the program.
the The disclosures, published on Sunday, showed that of the $ 207 million of purchases made on the first day of the purchase, around 21% corresponded to debt issued by companies in the non-cyclical consumer sector, while 15% corresponded to cyclical debt. consumption and 10% a of the technological debt. Issues rated below investment grade comprised 3.6% of the securities purchased.
In a separate disclosure, the New York Fed released the composition of the broad index that the central bank is using to make purchases. Fed officials have said the objective of the purchase is to maintain liquidity in the corporate debt market, so that issuers can access capital despite the deep economic recession created by the pandemic. The index is made up of almost 800 issuers.
In mid-May, the Fed began buying exchange-traded funds invested in corporate debt as it prepared for direct purchases. As of Tuesday, the Federal Reserve had accumulated $ 8.71 billion in assets, including ETFs and individual securities through the program, known as the Secondary Market Corporate Credit Mechanism.
On June 17, Federal Reserve Chairman Jerome Powell told the House of Representatives Financial Services Committee that the central bank would reallocate ETF purchases to individual debt securities through the index it created.
“Buying bonds in cash is going to form the primary mode of support over time by which we support market function,” Powell said during the hearing. “Over time, we will gradually move away from ETFs.”
The program will expire on September 30.
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