Adds quote, background
The Federal Reserve purchased US$305m in exchanged traded funds that invest in corporate bonds through its Secondary Market Corporate Credit Facility on Tuesday and Wednesday, Fed data released on Thursday showed.
The move is part of a string of unprecedented measures - including a primary corporate bond market facility (PMCCF) - that the central bank has announced to prop up a financial market hit earlier this year by volatility driven by the Covid-19 pandemic. nL1N2CU18Q
The Fed is taking a slow approach in its purchase of ETFs before its starts buying corporate bonds in the primary market, said TD Securities US senior rates strategist Gennadiy Goldberg.
"They are probably just testing the market before ramping up," Goldberg said. "The last thing they want is to buy so much that they start influencing ETF indexes."
Thursday's data covered only two days worth of Fed's ETF purchases that began on Tuesday.
The Fed did not disclose details on the ETFs it bought.
While the preponderance of the ETF buying will be focused on US investment-grade bonds, the secondary facility will also have exposure to high-yield corporates as well, the New York Fed said in a statement Monday.
Meanwhile, the Fed's Primary Market Corporate Credit Facility, which will acquire corporate bonds, will become operational in the "near future," it also said on Monday.