Fed to wind down portfolio of emergency facility (SMCCF) created to purchase corporate bonds

The nation’s central bank said it plans to begin winding down the portfolio of the Secondary Market Corporate Credit Facility (SMCCF), a temporary emergency lending facility that ceased its purchases of eligible assets Dec. 31.

“SMCCF portfolio sales will be gradual and orderly, and will aim to minimize the potential for any adverse impact on market functioning by taking into account daily liquidity and trading conditions for exchange traded funds and corporate bonds,” the Federal Reserve said in a release Wednesday. It said the Federal Reserve Bank of New York, which manages SMCCF operations, will announce additional details “soon and before sales begin.”

The SMCCF was created in March 2020 to support the availability of credit for large employers. It supported market liquidity by purchasing in the secondary market corporate bonds issued by investment grade U.S. companies or certain U.S. companies that were investment grade as of March 22, 2020, as well as U.S.-listed, exchange-traded funds whose investment objective is to provide broad exposure to the market for U.S. corporate bonds.

The SMCCF was established with the approval of the Treasury Secretary and equity provided by Treasury under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).

Federal Reserve Board announces plans to begin winding down the portfolio of the Secondary Market Corporate Credit Facility

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