Fed Discloses More Corporate Bond and ETF Purchases -- Update
July 10 2020 - 3:15PM
Dow Jones News
By Matt Wirz and Tom McGinty
The Federal Reserve bought about $1.3 billion face value of
corporate bonds from June 17-26, boosting its purchases under a
market stabilization buying program to about $1.5 billion at the
time, according to disclosures Friday.
The Fed bought a much larger swath of bonds as part of its plan
to build a portfolio of about 794 companies that tracks a broad
market index. The market value of corporate bond exchange-traded
funds bought by the Fed as part of the program also increased by
about $1.2 billion to $8 billion over the same period.
The purchases included about $25 million of bonds issued by
Apple Inc. and General Electric Co. and about $14 million by Walt
Disney Co., which weren't part of the first round. The total number
of companies in the portfolio increased to more than 300 on June 26
from about 40 on June 16.
The Fed's purchases of $7.9 billion of ETF shares between May 12
and June 29 resulted in paper gains through Thursday of $168
million, or 2.1%, net of brokers fees, according to a Wall Street
Journal analysis using pricing data from S&P Global Market
Intelligence.
The Fed is also buying the debt of some investment firms that
manage large high-yield debt funds. Purchases in late June included
small quantities of bonds issued by Apollo Management Holdings,
Ares Capital Corp. and Owl Rock Capital Corp.
The pace of buying has slowed more recently, according to
separate filings by the Fed. The change in the Fed's holdings of
corporate credit facilities grew by about $2.4 billion from June 25
to July 8, compared with approximately $3.1 billion in the two
preceding weeks, according to the filings.
The Fed began purchasing bond ETFs in May and expanded to
individual corporate bonds in June to improve access to capital for
U.S. companies during the coronavirus pandemic. The strategy helped
prompt a record surge in corporate bond markets, lifting the
performance of investment-grade and high-yield bond funds despite
an increase in corporate defaults and bankruptcies.
Write to Matt Wirz at matthieu.wirz@wsj.com and Tom McGinty at
tom.mcginty@wsj.com
(END) Dow Jones Newswires
July 10, 2020 15:00 ET (19:00 GMT)
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