Economy

Fed will begin ETF purchases today

Fed will begin ETF purchases today”

The program, under the supervision of the New York Fed, will invest in ETFs specializing in "fallen angel" companies - those considered worthy but whose credit ratings have been tarnished by the health crisis.

The New York Fed said the secondary market corporate credit facility is expected to begin purchasing eligible ETFs in early May. BlackRock Inc. was hired to manage the program for the Fed. The central bank, recognizing it would take longer to buy bonds, saw ETFs as a fast way to direct money rapidly into credit markets, said people familiar with the matter.

The New York Fed said the Treasury Department had made $37.5 billion of the $75 billion equity investment it will make in the special objective vehicle established by the central bank to undertake the primary- and secondary-market credit facilities.

The "preponderance of ETF holdings" will consist of those mainly exposed to USA investment-grade corporate bonds, with the remainder largely exposed to US high-yield corporate bonds, the New York Fed announcement said.

More news: Amazon Unveils New Fire HD 8 Tablet With Faster Processor, USB-C

The Federal Reserve on Tuesday started a corporate bond purchasing program that's meant to help "fallen angel" companies that have been affected by the corornavirus pandemic.

The facility is one of several tools recently created by the Fed to improve market functioning in the wake of the coronavirus pandemic, which has led to substantial market volatility.

The Fed has also slashed short-term rates to near zero levels and bought large amounts of Treasury and mortgage bonds, swelling its balance sheet to $6.7 trillion, from $3.8 trillion last September.



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