credit Markets

Behold! The Fed’s First $305 Million In ETF Purchases

Call it a "nibble".

The Fed bought $305 million worth of corporate credit ETFs this week, the latest update on the balance sheet appears to show. The Secondary Market Corporate Credit Facility was activated on Tuesday, after a solid month of speculation from market participants who were keen to front-run Powell in high-grade and high-yield products seen as likely targets for Fed buying. On Monday, the New York Fed said purchases would begin the following day, and flows observed in LQD - the most popular investment grade credit product - were generally seen as representing the Fed's first footprints in the market. This is a historic moment in the history of the institution. The Fed is now officially in the business of buying ETFs, much to the chagrin of critics, who have been shouting about "moral hazard" to anybody willing to listen since the corporate credit facilities were announced in March. A look at the daily flows and other metrics for LQD shows what some assume are the first purchases. "Looks like Fed made good on [its] word as LQD and HYG both saw volume jumps today via some sizable trades", Bloomberg's ETF maven Eric Balchunas wrote Tuesday, while being careful to note that there was "n
Subscribe or log in to read the rest of this content.

5 comments on “Behold! The Fed’s First $305 Million In ETF Purchases

  1. George says:

    Watching the Dow toss aside that down move at mid day made me suspicious …A lot of other activity by other actors is catalyzed at the hint of Fed dabbling in Equities…. That can be mysterious to me but I am certain others have a clear picture of Bank and Hedge fund reaction especially in an ops expiration week ahead….

  2. MirandaSez says:

    We dabble unabashedly in speculating into traders’ who speculate that the Fed is only one step away from buying equities. Or, that the Fed’s backstop on corp debt is an indirect boost to corp profitability. Meanwhile, corps are cranking out tons of paper and investors in that debt have a printing press to remove(?) risk.

  3. Wiler says:

    slowly pushing away from the table (wait…don’t forget the drink) …is how I feel right now…

    mosey on down the road and read up on YCC I suppose

  4. Axiomatic says:

    Why does the Fed have to buy the ETFs (incurring principal risk) rather than just accept them as collateral (with a haircut) in a repo transaction?

Speak your mind

This site uses Akismet to reduce spam. Learn how your comment data is processed.