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Fed Will Begin Buying Broad Portfolio of Corporate Bonds

June 16, 2020

The Federal Reserve said Monday that it will begin buying individual corporate bonds under its Secondary Market Corporate Credit Facility, an emergency lending program that to date has purchased only exchange-traded funds.

 

The central bank also spelled out for the first time how it plans to implement its buying strategy, saying it would follow a diversified market index of U.S. corporate bonds created expressly for the facility. The Fed built the index internally, and a spokesman couldn’t immediately say whether its details would be made public.

 

“This index is made up of all the bonds in the secondary market that have been issued by U.S. companies that satisfy the facility’s minimum rating, maximum maturity and other criteria,” the Fed said in a statement. “This indexing approach will complement the facility’s current purchases of exchange-traded funds.”

 

The creation of the index removed a potential hurdle for companies that would have had to certify that they were in compliance with restrictions outlined for the program.


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