The Fed will increase its corporate bond portfolio
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The Fed will increase its corporate bond portfolio
Federal Reserve Chairman Jerome Powell said bond purchases are 'supporting accommodative financial conditions' and that the Main Street Lending Facility will be up and running soon.
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.
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.
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.
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