“We have completely divorced the economy from the stock and the bond markets,” Social Capital CEO Chamath Palihapitiya says. “The Fed has been the principal agent of that obfuscation.”
The Fed is starting its long-awaited program in which it will purchase corporate bonds and ETFs that track them.
In particular, the buying will target "fallen angels" that have been downgraded due to the coronavirus crisis.The New York Federal Reserve building in New York.The Federal Reserve will be starting its long-awaited corporate bond program Tuesday amid a boom in debt issuance. The central bank will kick off its Secondary Market Corporate Credit Facility, which is part of a history-making initiative in which it will purchasethat track the corporate debt market. Asset management giant BlackRock will be running the operation under the New York Fed's supervision.
In particular, the facility will buy up ETFs that hold so-called fallen angel bonds of companies that formerly had been classified as investment grade but have been downgraded to speculative or junk, particularly in cases where those downgrades happened due to the coronavirus crisis. Its companion program, the Primary Market Corporate Credit Facility, in which the Fed will be buying the actual bonds as well as syndicated loans, is scheduled to start soon.
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