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The U.S. government has purchased millions of dollars in corporate bonds issued by entertainment giants like Fox Corp., Comcast, AT&T and others as part of a debt liquidity program spurred on by the novel coronavirus pandemic.
The Federal Reserve’s Secondary Market Corporate Credit Facility is designed to provide liquidity to the corporate debt market, with the central bank set to purchase billions of dollars worth of investment-grade debt from companies on the secondary market over the coming months.
The Fed began buying electronically traded funds (ETFs) focused on corporate debt in May, but just began buying individual bonds on June 16.
According to data released by the central bank on Sunday, the government purchased $17 million of bonds from companies in the communications sector, and $21 million worth of bonds in the technology sector on the first day of trading June 16.
On June 16 and over the following few days the Fed purchased more than $16 million in debt from WarnerMedia owner AT&T, more than $13 million in debt issued by NBCUniversal owner Comcast, $4.5 million in debt issued by Fox Corp., $5.7 million in debt issued by Microsoft and $1.5 million in debt issued by ActivisionBlizzard.
Other corporate debt purchased by the government included bonds from blue chip companies like WalMart, Pepsico, Boeing and UPS.
The Fed’s goal with the facility is to buy holdings that are representative of the overall corporate debt market, and it has created a bond index to determine what debt it will buy. Per the index, the central bank will buy debt from The Walt Disney Co., Discovery Inc., ViacomCBS, Amazon, Alphabet and others over the coming months.
“Buying cash bonds is going to form the primary mode of support over time by which we support market function,” Federal Reserve chairman Jerome Powell told the House Financial Services Committee June 17. “Over time, we will gradually move away from ETFs.”
The Fed also has another corporate debt facility, the Primary Market Corporate Credit Facility, which it says is yet to make any purchases. The PMCCF will buy corporate debt directly from issuers, rather than on the secondary market.
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