U.S. Fed plans to wind down pandemic corporate credit facility

(Xinhua) 08:18, June 03, 2021

WASHINGTON, June 2 (Xinhua) -- The U.S. Federal Reserve Board announced on Wednesday that it plans to begin winding down the portfolio of the Secondary Market Corporate Credit Facility (SMCCF), a temporary emergency lending facility launched during the pandemic last year.

"The SMCCF proved vital in restoring market functioning last year, supporting the availability of credit for large employers, and bolstering employment through the COVID-19 pandemic," the Fed said in a statement.

"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 Fed said, adding the Federal Reserve Bank of New York, which manages the operations of the SMCCF, will announce additional details before sales begin.

The SMCCF, which stopped purchasing assets at the end of 2020, held around 5.21 billion U.S. dollars of bonds from companies and 8.56 billion dollars of exchange traded funds that hold corporate debt as of April 30, according to The Wall Street Journal.

A Fed official said the sales should be completed by the end of this year and net proceeds will be remitted to the U.S. Treasury Department, the Journal reported.

A Federal Reserve spokeswoman told Bloomberg News that the portfolio winddown has nothing to do with monetary policy, and it is not a signal about monetary policy.

The Fed has pledged to keep its benchmark interest rates unchanged at the record-low level of near zero, while continuing its asset purchase program at least at the current pace of 120 billion U.S. dollars per month, until the economic recovery makes "substantial further progress." 

(Web editor: Shi Xi, Liang Jun)


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