Federal Reserve Chairman Jerome Powell
Photo: joshua roberts/Reuters
The Federal Reserve will soon begin selling off the corporate bonds and exchange-traded funds it amassed last year through an emergency-lending vehicle set up to contain the Covid-19 pandemic’s economic fallout.
The vehicle, known as the Secondary Market Corporate Credit Facility, or SMCCF, held $5.21 billion of bonds from companies including Whirlpool Corp. , Walmart Inc. and Visa Inc. as of April 30. In addition, it held $8.56 billion of exchange-traded funds that hold corporate debt, such as the Vanguard Short-Term Corporate Bond ETF.
A Fed official said the sales should be completed by the end of this year. Net proceeds will be remitted to the Treasury Department.
The Fed’s corporate-debt holdings are distinct from its $7.3 trillion balance sheet of Treasury securities and agency mortgage-backed securities. The central bank is continuing to purchase those types of assets to the tune of at least $120 billion a month as part of its monetary-policy goal of holding down borrowing costs until the economy recovers further from the pandemic.
The Fed added that its corporate-bond and ETF sales “will aim to minimize the potential for any adverse impact on market functioning by taking into account daily liquidity and trading conditions” for ETFs and corporate bonds.
Write to Paul Kiernan at [email protected]
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