Fed says SMCCF will begin buying portfolio of corporate bonds
The Federal Reserve Board announced updates to the Secondary Market Corporate Credit Facility, or SMCCF, which will begin buying “a broad and diversified portfolio of corporate bonds to support market liquidity and the availability of credit for large employers.”
The Fed added that “the SMCCF will purchase corporate bonds to create a corporate bond portfolio that is based on a broad, diversified market index of U.S. corporate bonds.
This index is made up of all the bonds in the secondary market that have been issued by U.S. companies that satisfy the facility’s minimum rating, maximum maturity, and other criteria.
This indexing approach will complement the facility’s current purchases of exchange-traded funds.
The Primary Market and Secondary Market Corporate Credit Facilities were established with the approval of the Treasury Secretary and with $75 billion in equity provided by the Treasury Department from the CARES Act.”
The SMCCF supports market liquidity by purchasing in the secondary market corporate bonds issued by investment grade U.S. companies or certain U.S. companies that were investment grade as of March 22, 2020, as well as U.S.-listed exchange-traded funds whose investment objective is to provide broad exposure to the market for U.S. corporate bonds.
The SMCCF’s purchases of corporate bonds will create a portfolio that tracks a broad, diversified market index of U.S. corporate bonds.
The Treasury, using funds appropriated to the ESF through the CARES Act, will make an equity investment in an SPV established by the Federal Reserve for the SMCCF and the Primary Market Corporate Credit Facility.
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