Apple, AT&T, Jack Daniel’s: Fed issues details on bond buys

Savage Premium Subscription

AP News:

The Federal Reserve on Sunday released a list of roughly 750 companies, including Apple, Walmart and ExxonMobil, whose corporate bonds it will purchase in the coming months in an effort to keep borrowing costs low and smooth the flow of credit.

The central bank also said it has, so far, purchased nearly $429 million in corporate bonds from 86 of those companies, including AT&T, Walgreen’s, Microsoft, Pfizer and Marathon Petroleum.

The Fed announced in March that it would, for the first time in its history, purchase corporate bonds as the intensifying viral outbreak caused panicked investors to dump most types of securities in a rush to hold cash. That pushed up a range of interest rates and made it nearly impossible for companies to borrow more by issuing new bonds.

Yet once the Fed said it intended to purchase up to $750 billion of corporate debt, investors began buying bonds again and eventually large companies resumed issuing large amounts of new bonds. Recent economic research has found that simply by announcing the program, the Fed was able to boost confidence in corporate bonds and improve the market’s efficiency.

Fed Chair Jerome Powell has said that by ensuring large companies can borrow more, the Fed is seeking to keep those firms from having to layoff workers. But the corporations aren’t required to keep all their workers.

At a hearing last week, Sen. Pat Toomey, R-Pa., questioned Powell about whether the purchases were still necessary, since the corporate bond market has largely recovered. Powell said the Fed had to follow through on its promises.

Read more at AP News