Liquid Alternatives: Fed to Launch Corporate Bond ETF Purchases Today

https://dailyalts.com/wp-content/uploads/2020/05/31922762107_3f9441583d_c.jpg

The New York Fed announced the move Monday.

“Fallen angel” corporate bonds that have taken a rating hit may be supported by the corporate bond ETF purchase program envisaged in the Secondary Market Corporate Credit Facility (SMCCF). The facility will kick in today. ETFs holding these fallen angels, whose ratings fell from investment grade to speculative or junk grade due to COVID, maybe the earlier targets in the program. (CNBC) The Fed could buy up to $750 billion under the SMCCF, and the Primary Market Corporate Credit Facility (PMCCF).

Qualifying ETFs

The New York Fed has been tasked with the purchases. It has appointed asset manager Blackrock (NYSE: BLK) to execute the plan. The Treasury will provide $75 billion in equity which will be leveraged 10X to the targeted $750 billion.

However, the program will run with conditionalities in place:

“The preponderance of ETF holdings will be of ETFs whose primary investment objective is exposure to U.S. investment-grade corporate bonds, and the remainder will be in ETFs whose primary investment objective is exposure to U.S. high-yield corporate bonds.

Moreover, the SMCCF will consider several additional factors in determining which ETFs will be eligible for purchase. Those considerations include: the composition of investment-grade and non-investment-grade rated debt, the management style, the amount of debt held in depository institutions, the average tenor of the underlying debt, the total assets under management, the average daily trading volume, and leverage if any.”

Bond ETFs already gung ho

The iShares iBoxx Investment Grade Corporate Bond ETF (NYSEARCA: LQD) is up 18% since March 20, the iShares iBoxx High Yield Corporate Bond ETF (NYSEARCA: HYG) has risen 14% and the SPDR Bloomberg Barclays High Yield Bond ETF (NYSEARCA: JNK) has surged 14% as well.

Moreover, LQD is trading today at $126.60, up 0.84%.

HYG is up 0.46% to $79.75 and JNK is higher by 0.40% at $98.39.

Related Story:  Liquid Alternatives: Muni Bond Caucus Wants Fed to Help; NY Fed to Buy ETFs in May

Image credit: Flickr                                                 

Free Industry News

Subscribe to our free newsletter for updates and news about alternatives investments.

  • This field is for validation purposes and should be left unchanged.


Shape

Latest Alternative Investment News

https://dailyalts.com/wp-content/uploads/2021/05/cryptocurrency-3409727_640.jpg
Alternative Investments/Digital: A New ETF From Bitwise For “Crypto-Adjacent” Assets

The new Crypto Industry Innovators ETF (NYSE: BITQ) from Bitwise Asset Management offers investors exposure to shares of “public companies that are participants in the growing bitcoin and cryptocurrency sector.”…

https://dailyalts.com/wp-content/uploads/2021/05/social-icon-google-cloud-1200-630.png
FinTech: PayPal Shifting More Applications To Google Cloud As Digital Payments Surge Higher
May 14, 2021     FinTech, News

PayPal (NASDAQ: PYPL) which has built its hybrid cloud strategy over the years with Google Cloud as a partner, is now moving more and more of its infrastructure workloads to…

https://dailyalts.com/wp-content/uploads/2021/05/raisin-founder-team-michael-stephan-tamaz-georgadze_frank-freund-19Q2-farclukas_schramm-web.jpg
Alternative Investments/ESG: Raisin’s ETF Configurator Allows Investors ‘Do-It-Yourself’ ESG

The pan-European savings marketplace Raisin launched its Raisin Invest ETF platform in Germany in 2018. Raisin Invest has since become one of the market’s biggest robo advisers and now boasts…

https://dailyalts.com/wp-content/uploads/2021/05/entrepreneur-4784289_640.jpg
Venture Capital: Making VC More Inclusive – Google To Invest $40M In Black-Led Startups

Jeremiah Gordon is General Counsel at CapitalG, Alphabet’s (NASDAQ: GOOGL) independent growth fund which has $3 billion under management. He also leads an Alphabet-wide team focused on investing in Black-led…