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Fed Discloses More Corporate Bond and ETF Purchases — Update

By Matt Wirz and Tom McGinty 

The Federal Reserve bought about $1.3 billion face value of corporate bonds from June 17-26, boosting its purchases under a market stabilization buying program to about $1.5 billion at the time, according to disclosures Friday.

The Fed bought a much larger swath of bonds as part of its plan to build a portfolio of about 794 companies that tracks a broad market index. The market value of corporate bond exchange-traded funds bought by the Fed as part of the program also increased by about $1.2 billion to $8 billion over the same period.

The purchases included about $25 million of bonds issued by Apple Inc. and General Electric Co. and about $14 million by Walt Disney Co., which weren't part of the first round. The total number of companies in the portfolio increased to more than 300 on June 26 from about 40 on June 16.

The Fed's purchases of $7.9 billion of ETF shares between May 12 and June 29 resulted in paper gains through Thursday of $168 million, or 2.1%, net of brokers fees, according to a Wall Street Journal analysis using pricing data from S&P Global Market Intelligence.

The Fed is also buying the debt of some investment firms that manage large high-yield debt funds. Purchases in late June included small quantities of bonds issued by Apollo Management Holdings, Ares Capital Corp. and Owl Rock Capital Corp.

The pace of buying has slowed more recently, according to separate filings by the Fed. The change in the Fed's holdings of corporate credit facilities grew by about $2.4 billion from June 25 to July 8, compared with approximately $3.1 billion in the two preceding weeks, according to the filings.

The Fed began purchasing bond ETFs in May and expanded to individual corporate bonds in June to improve access to capital for U.S. companies during the coronavirus pandemic. The strategy helped prompt a record surge in corporate bond markets, lifting the performance of investment-grade and high-yield bond funds despite an increase in corporate defaults and bankruptcies.

Write to Matt Wirz at matthieu.wirz@wsj.com and Tom McGinty at tom.mcginty@wsj.com

 

(END) Dow Jones Newswires

July 10, 2020 15:00 ET (19:00 GMT)

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