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The Fed unveils top corporate-bond ETFs targeted in its $1.3 billion stimulus spree


The Fed unveils top corporate-bond ETFs targeted in its $1.3 billion stimulus spree

Kevin Lamarque/Reuters 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,…

The Fed unveils top corporate-bond ETFs targeted in its $1.3 billion stimulus spree

Federal ReserveKevin Lamarque/Reuters

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:

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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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