U.S. markets closed

Fed to begin buying corporate bonds

Brittany De Lea

The Federal Reserve announced Monday that it would begin purchasing individual corporate bonds to support liquidity in the market and to make credit more accessible among large employers.

The move is an update to its Secondary Market Corporate Credit Facility – established with approval from, and $75 billion provided by, the CARES Act, which was implemented to help aid American families and businesses throughout the coronavirus pandemic.

WEAKENING US DOLLAR STILL UNRIVALED AS WORLD'S RESERVE CURRENCY

The Fed will create a corporate bond portfolio, based on “a broad diversified market index of U.S. corporate bonds.” The bonds must satisfy the facility’s terms, including its minimum rating and a remaining maturity of five years or less.

BLOCKBUSTER JOBS RALLY PUTS US ON FAST TRACK TO CORONAVIRUS RECOVERY

The facility has already committed to purchasing exchange-traded funds (ETFs), which began last month. This week, it is expected to start corporate purchasing debt on the secondary market.

The Fed said it would stop buying corporate bonds and ETFs no later than Sept. 30 unless otherwise stipulated by its Board of Governors or the Treasury Department.

Monday's announcement resonated with investors and sent stocks higher, with the Dow Jones Industrial Average and the S&P 500 both bouncing up into the green after trading down earlier in the session.

GET FOX BUSINESS ON THE GO BY CLICKING HERE

Related Articles