U.S Federal Reserve seeks to undo corporate bond capital obtained in 2020 through a backup facility, according to Reuters. The bonds started to cool the lending market at the peak of the pandemic.
The Fed promised the process to be done systematically to reduce impact on markets and is in no way related to its monetary policy.
The corporate credit enabled money circulation in businesses that would have otherwise been closed by the depression witnessed as the pandemic struck.
Two corporate loan facilities set up by Fed in March 2020 were less utilized, with the primary loans being unutilized completely.
The Fed is also accumulating government securities worth $120 billion each month and is yet to decide when to scale it back.
Credit facilities set up by the Fed had $13.8 billion outstanding as of April 30, of which $8.6 billion were corporate bond ETF holdings and corporate bonds worth $5.2 billion.
