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Fed Adds Individual Corp Bonds To Holdings: Includes Apple, Expedia

Goldman Sachs
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EDITOR NOTE: The Federal Reserve has clearly overstepped its boundaries when it began directly allocating stimulus to corporations. No longer restricting itself to monetary policy as an independent institution, it’s now a tool for government’s fiscal policies as well. Now adding Apple, Anheuser-Busch, and Expedia to its balance sheet, the Fed’s monetary (and now fiscal) powers go virtually unchecked. These ‘bailouts’ should be of major concern to you. Every increase in the money supply dilutes the dollar, decimating your purchasing power. In short, you’re paying for it one way or another--if not via direct tax, then a hidden tax will take money directly out of your pocket and to the coffers of these large corporations.

(Reuters) - The U.S. Federal Reserve added $1.33 billion in bonds of individual companies from June 22 to June 30, including iPhone maker Apple Inc(AAPL.O), beer-producer Anheuser-Busch (ABI.BR)and travel booker Expedia Group(EXPE.O).

The bond purchases, all on the secondary market, bring the Fed’s holdings of individual corporate bonds to $1.59 billion, according to the latest of what will be monthly reports to Congress on the Fed’s emergency lending facilities to nurse the economy through the coronavirus pandemic.

In all, the Fed’s portfolio included 330 issuers, led by $26.9 million of Verizon Communications (VZ.N) bonds, $26.3 million of AT&T Inc(T.N) bonds, and $25.5 million of Apple bonds.

Holdings also included $3.2 million of Expedia and $10.1 million of Ford Motor Co(F.N), whose debt rating was downgraded to junk after the coronavirus crisis hit.

The Fed also held $7.97 billion in 16 corporate bond exchange traded funds (ETF), the data showed. Roughly half of the corporate bond ETF shares purchased went to funds owned by BlackRock, which is managing the Fed’s corporate credit facilities. BlackRock waived asset management fees on ETFs purchased on behalf of the Fed.

Other global central banks have bought individual corporate bonds for years, but the program is new for the Fed during this pandemic. The aim is to ensure companies can continue to finance themselves, and not be forced into bankruptcy because they are unable to raise needed cash.

The program is backed by investment capital from the U.S. Treasury to absorb any losses from defaults.

The Fed has reduced the pace of corporate bond purchases made in the secondary market from about $300 million daily to slightly less than $200 million a day, and it could stop the purchases entirely if market conditions keep improving, Daleep Singh, executive vice president of the New York Federal Reserve said this week.

Originally posted on Reuters

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