The Fed will start buying corporate-bond ETFs on Tuesday — launching a key component of its emergency coronavirus response
Monday that it will begin buying corporate-debt exchange-traded funds on May 12 to further aid markets buffeted by the coronavirus pandemic., when the central bank unveiled its Secondary Market Corporate Credit Facility alongside a spate of emergency lending pools. Though the program's reveal was enough to lift credit stresses, markets have been eagerly anticipating its rollout as firms grapple with the pandemic's economic toll.
The facility will buy up funds"whose investment objective is to provide broad exposure to the market" for corporate debt, the Fed said in a Monday statement. Direct purchases of corporate bonds through a separate facility will begin"in the near future," the authority added.
The Fed is working alongside the Treasury Department to deploy monetary relief through nine separate facilities. The Treasury funded half of the $75 billion investment needed for the central bank's corporate credit facilities, the Fed said Monday. Most of the ETF purchases will focus on investment-grade debt, while a smaller share will go toward ETFs with exposure to the high-yield bond market. The Fed will consider funds' management styles, composition, average tenor, average daily trading volume, and other factors when determining facility eligibility.
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