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Fed set to buy Individual Corporate Bonds

Fed set to buy Individual Corporate Bonds

June 17, 2020

In a continuing effort to minimize the economic effects brought upon by the coronavirus, the Fed announced it will start buying individual corporate bonds in hopes to prop up the credit market.

The Fed recently extended the Secondary Market Corporate Credit Facility capabilities by allowing the facility to buy up to $750 billion dollars in corporate credit.

In order for companies to receive the financial aid from the Fed, they must meet the following requirements:

  1. They have to be a U.S. company
  2. The company’s bond must have a remaining maturity date of five years or less
  3. Issuers were rated a BBB- or /Baa3 before March 22
  4. The issuer has not received specific support pursuant to the CARES Act or any subsequent federal legislation.
  5. The issuer must satisfy the conflicts of interest requirements of section 4019 of the CARES Act.

While these are the mandatory requirements, the Fed is looking to tailor their help to small to mid-size companies worth $250,000 to $300 million.

For more information about the Fed’s new involvement in the bond market, a good website to read is:

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