The Fed unveils top corporate-bond ETFs targeted in its $1.3 billion stimulus spree

Kevin Lamarque/ReutersA man walks past the U.S. Federal Reserve in Washington October 12, 2016.

The Federal Reserve’s first week of corporate-credit exchange-traded fund purchases primarily drove cash into industry giants including the iShares iBoxx US Dollar Investment Grade Corporate Bond ETF and Vanguard’s Intermediate-Term Corporate Bond ETF, a Friday release revealed.

The central bank boosted credit markets through the coronavirus pandemic after announcing its historic move into corporate-debt assets. Purchases of corporate-bond ETFs through the Secondary Market Corporate Credit Facility began on May 12. In the facility’s first six days of operation, the Fed bought up $US1.3 billion worth of ETFs over 158 transactions.

Here are the Fed’s top five ETF holdings after its first week of purchases:


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A separate release showed the Fed holding nearly $US3 billion in ETFs as of Wednesday. The central bank has indicated it would purchase up to $US250 billion in outstanding debt and $US500 billion in new bonds throughout the lifetime of its relief programs.

The top three most-bought ETFs accounted for the majority of the Fed’s purchases over the week.

Roughly $US223 million was allocated to high-yield bond ETFs over the period. The Fed’s move into junk-rated credit initially rankled some experts and fuelled concerns that the central bank could encourage risk-taking amid the soured economic backdrop.

The Fed is working alongside asset-management giant BlackRock to facilitate its purchases. Eight of the 15 ETFs purchased through May 18 were BlackRock vehicles. Trader commissions from such trades reached $US125,861.73, according to Fed data.

The central bank plans to open its remaining lending programs, including one for directly purchasing corporate bonds, before June.


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