- A Friday release detailed which corporate-credit ETFs the Federal Reserve bought up from the program’s May 12 start to May 18.
- BlackRock’s iShares iBoxx US Dollar Investment Grade Corporate Bond ETF was the most purchased, with the central bank buying up 2,521,892 shares over the period.
- Total purchases reached $1.3 billion by May 18, though a separate release showed the figure swelling to roughly $3 billion by Wednesday.
- About $223 million of the Fed’s ETF holdings are focused on high-yield debt, exposing the bank to firms at greater risk of default amid the coronavirus recession.
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The Federal Reserve’s first week of corporate-credit exchange-traded fund purchases primarily drove cash into industry giants including the iShares iBoxx US Dollar Investment Grade Corporate Bond ETF and Vanguard’s Intermediate-Term Corporate Bond ETF, a Friday release revealed.
The central bank boosted credit markets through the coronavirus pandemic after announcing its historic move into corporate-debt assets. Purchases of corporate-bond ETFs through the Secondary Market Corporate Credit Facility began on May 12. In the facility’s first six days of operation, the Fed bought up $1.3 billion worth of ETFs over 158 transactions.
Here are the Fed’s top five ETF holdings after its first week of purchases:
- iShares iBoxx US Dollar Investment Grade Corporate Bond ETF
- Shares purchased: 2,521,892
- Market value (as of May 19): $326,282,386.96
- Vanguard Intermediate-Term Corporate Bond ETF
- Shares purchased: 2,483,885
- Purchase amount: $228,095,159.55
- Vanguard Short-Term Corporate Bond ETF
- Shares purchased: 2,776,786
- Purchase amount: $226,196,987.56
- iShares iBoxx High Yield Corporate Bond ETF
- Shares purchased: 1,255,084
- Purchase amount: $100,657,736.80
- SPDR Bloomberg Barclays High Yield Bond ETF
- Shares purchased: 905,284
- Purchase amount: $89,532,587.60
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A separate release showed the Fed holding nearly $3 billion in ETFs as of Wednesday. The central bank has indicated it would purchase up to $250 billion in outstanding debt and $500 billion in new bonds throughout the lifetime of its relief programs.
The top three most-bought ETFs accounted for the majority of the Fed’s purchases over the week.
Roughly $223 million was allocated to high-yield bond ETFs over the period. The Fed’s move into junk-rated credit initially rankled some experts and fueled concerns that the central bank could encourage risk-taking amid the soured economic backdrop.
The Fed is working alongside asset-management giant BlackRock to facilitate its purchases. Eight of the 15 ETFs purchased through May 18 were BlackRock vehicles. Trader commissions from such trades reached $125,861.73, according to Fed data.
The central bank plans to open its remaining lending programs, including one for directly purchasing corporate bonds, before June.
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