The United States Central Bank, the Fed, is now beginning to buy listed debt fund units. He wants to indirectly guarantee cheap loans to large American corporations. He caused a lot of controversy.
Fed and the stock exchange
For many commentators, however “Violation of another taboo.” Specifically, this is the new Secondary Market Corporate Credit Facility (SMCCF) Program. This is another initiative to help overcome the crisis.
The Fed will now buy in units ETF listed on the US Stock Exchanges. These are debt funds investing in investment grade corporate bonds. There are also plans to purchase ETFs which have in their wallets so-called junk bonds.
What amounts are we talking about? About USD 75 billion, half of which will be donated by the Treasury Department.
“In practice, this means that The Fed will guarantee high corporate bond prices, enabling large US corporations to incur debt at low cost. Henceforth the profitability of commercial papers will not be determined by the market but by the scale of US Central Bank involvement. “
– translates to bankier.pl Krzysztof Kolany.
Which may be surprising the program has no set date or end conditions.
“Once the measures of market functioning have returned to levels that are more similar – but not fully – to levels that reflect normal economic conditions, extensive shopping will continue at a limited but stable pace to maintain these conditions. ”
– we read in relevant project documents.
Madness or method?
This is not the first Fed’s controversial decision recently. Since March, the US Central Bank has been acting as it would “Printable” crisis. Unlimited and unlimited have already been announced “Quantitative loosening”.
In addition, the government paid USD 1,200 to adult Americans, and USD 500 to each child. It doesn’t matter if the citizen has actually lost his job or is good at finances. The 1200+ program did not involve only millionaires.
Today, the controversy is also raised by the fact that the Fed hired the BlackRock investment company to administer the new crisis management program. This is expected to earn over $ 15 million over the next 12 months.
Get notifications about important new market events.