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The Federal Reserve will discharge its emergency purchases of US corporate bonds


The Federal Reserve said it would start selling corporate bonds և fixed income funds it bought last year to stabilize its financial system, addressing unprecedented emergency measures that electrified markets and reduced borrowing costs for companies. pandemic,

The US Federal Reserve announced on Wednesday that assets acquired through its so-called Secondary Market Corporate Credit Institution or SMCCF will be gradually sold. The goal is to complete the process by the end of the year, says a Fed official.

The institution, which combined US Treasury capital with the central bank’s own resources, acquired corporate bonds and exchanged assets for sale on the secondary market. That was it turned over In April of last year, along with 12 other facilities aimed at supporting a number of debt markets, which were under severe pressure after the US economy crashed.

According to the FMC, the use of another SMCCF facility to support the primary corporate debt market was less than $ 14 billion, down 2% from $ 750 billion.

In: Feeds Limited use testified to its success in quickly restoring market functionality by simply pledging its support. Corporate bond prices have plummeted, and companies hampered by the epidemic remain capital markets.

The central bank has also cut interest rates to zero and pledged to buy an unlimited amount of US government debt.

“The SMCCF was instrumental in reviving the market last year, promoting access to credit for large employers, and promoting employment through the Covid-19 epidemic,” the Federal Reserve said Wednesday.

“The sale of the SMCCF portfolio will be gradual, regular, with the aim of minimizing the potential for any adverse effects on market activity, taking into account day-to-day liquidity, trading conditions for corporate bonds, corporate bonds.”

Investors largely rejected the announcement, in part because the Fed’s actual presence in the market was quite large. Limited:, After the decision of the US Treasury, the institution was closed for new purchases in late December.

“It’s hard to think of a more effective tool to lend credit to companies during an epidemic,” said Patrick Leary, Incapital Senior Salesman.

Fed officials have begun to do the same debate when they can consider reducing other emergency measures taken during the crisis, including its $ 120 billion monthly public procurement և mortgage debt.

Leary said the SMCCF statement paves the way for the final removal of the policy’s discussion facilities.

“This is a small step, it’s a good way to test the waters, how the market will react,” Leary said.

Additional post by Brooke Fox in New York

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