Fed buys more corporate bonds but may soon end purchases

By CHRISTOPHER RUGABER
Posted 7/10/20

WASHINGTON (AP) — The Federal Reserve said Friday that it purchased $1.3 billion in corporate bonds in late June as part of its effort to keep U.S. interest rates low and ensure large companies can …

To Our Valued Readers –

Visitors to our website will be limited to five stories per month unless they opt to subscribe.

For $5.99, less than 20 cents a day, subscribers will receive unlimited access to the website, including access to our Daily Independent e-edition, which features Arizona-specific journalism and items you can’t find in our community print products, such as weather reports, comics, crossword puzzles, advice columns and so much more six days a week.

Our commitment to balanced, fair reporting and local coverage provides insight and perspective not found anywhere else.

Your financial commitment will help to preserve the kind of honest journalism produced by our reporters and editors. We trust you agree that independent journalism is an essential component of our democracy. Please click here to subscribe.

Sincerely,
Charlene Bisson, Publisher, Independent Newsmedia

Please log in to continue

Log in
I am anchor

Fed buys more corporate bonds but may soon end purchases

Posted

WASHINGTON (AP) — The Federal Reserve said Friday that it purchased $1.3 billion in corporate bonds in late June as part of its effort to keep U.S. interest rates low and ensure large companies can borrow by selling bonds.

The Fed bought bonds issued by several hundred large companies, including AT&T, PepsiCo, and Berkshire Hathaway, the conglomerate controlled by billionaire Warren Buffett. Combined with purchases from earlier in the month, the Fed has bought nearly $1.8 billion in corporate debt.

The purchases are intended to keep interest rates on corporate bonds from spiking, which would make it harder for companies to borrow by selling debt. The Fed's that it would, for the first time, purchase corporate debt quickly boosted trading in corporate bonds and in that market.

The Fed is buying bonds from a wide range of companies to mimic a broad market index, in order to avoid favoring any specific industry. Last month it bought bonds issued by UPS, Home Depot, oil and gas pipeline company Kinder Morgan, and drugstore chain CVS.

The Fed nearly $8 billion in pools of bonds held in exchange-traded funds, which operate similarly to mutual funds.

A Fed official that the central bank has slowed its bond buying in recent weeks and may continue to do so if the market remains relatively healthy. The Fed's purchases remain well short of the program's original cap of $750 billion. The Treasury Department has provided $75 billion in taxpayer funds to offset any losses.

“If market conditions continue to improve, Fed purchases could slow further, potentially reaching very low levels or stopping entirely,” Daleep Singh, executive vice president of the New York Federal Reserve said Wednesday. “This would not be a signal that the (bond purchase program's) doors were closed, but rather that markets are functioning well.”

Comments