Fed Seems to Skirt the Law to Buy Corporate Bonds
Companies weren’t likely to use the central bank’s new facility, so policy makers cast aside CARES Act rules.
Doing what he wants.
Photographer: Andrew Harrer/Bloomberg
From the moment the Federal Reserve announced how it would buy bonds for its $250 billion Secondary Market Corporate Credit Facility, something seemed amiss.
After all, the central bank already had criteria in place for buying individual corporate bonds, separate and distinct from exchange-traded funds. And yet, the Fed this week unveiled an entirely new class of eligible assets, called “Eligible Broad Market Index Bonds.” Why? Within an hour, I speculated that this was little more than a workaround for issuers being forced to certify that they’re in compliance with the Coronavirus Aid, Relief, and Economic Security Act.