Market Overview

Market Jumps After Federal Reserve Begins Buying Corporate Bonds For The First Time

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Market Jumps After Federal Reserve Begins Buying Corporate Bonds For The First Time

After a sluggish start, stock market indexes jumped Monday afternoon after the Federal Reserve announced it will begin buying corporate bonds of individual companies.

What Happened: The Fed said on Monday it's expanding its Secondary Market Corporate Credit Facility outside of exchange-traded funds and will begin buying individual corporate bonds as well.

“The SMCCF will purchase corporate bonds to create a corporate bond portfolio that is based on a broad, diversified market index of U.S. corporate bonds,” the Fed said Monday.

Why It’s Important: The SMCCF is authorized to buy up to $750 billion in corporate credit. The stimulus program was announced back in March, and it is the first time in history the Fed purchased corporate bonds to help inject liquidity into the economy.

On Monday, the Federal Reserve said its individual bond buying will be limited to bonds with remaining maturities of five years or less and issuers with credit ratings of BBB- or Baa3 as of March 22.

In addition to its SMCCF, The Federal Reserve has also authorized but not yet launched a Primary Market Corporate Credit Facility as well.

Benzinga’s Take: Once again, the Federal Reserve has expanded its stimulus actions into uncharted territory. Monday’s stock market rally is a sign that the Fed’s aggressive actions are helping to boost investor confidence despite an uncertain economic outlook.

Do you agree with this take? Email feedback@benzinga.com with your thoughts.

Related Links:

Fed Keeps Rates Intact, Maintains $80B Monthly Pace Of Bond Buying

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