(Bloomberg) -- The U.S. central bank expects to begin purchasing shares of eligible exchange-traded funds as part of its emergency lending programs in early May, according to the Federal Reserve Bank of New York.
Lending through the Fed’s so-called secondary market corporate credit facility and primary market corporate credit facility via purchases of corporate bonds will begin soon thereafter, the New York Fed announced Monday on its website.
“Additional details on timing will be made available as those dates approach,” it said.
The credit facilities are backed by the more than $2 trillion economic relief package passed by Congress in March, to help shield the U.S. economy from the harm of the coronavirus pandemic. Businesses across the nation have shuttered to limit contagion and more than 30 million people have claimed unemployment benefits in the last six weeks.
Fed officials first announced the creation of the facilities on March 23. Though they’ve not yet been launched, the announcement has had an important stabilizing effect in financial markets.
“Many companies that would’ve had to come to the Fed have now been able to finance themselves privately since we announced the initial term sheet on these facilities,” Fed Chair Jerome Powell said during an April 29 press conference. “The ultimate demand for the facilities is quite difficult to predict because there is this ‘announcement effect’ that really gets the market functioning again. Of course, we have to follow through, though. And we will follow through to validate that announcement effect.”
Investors have piled into bond ETFs in anticipation of the Fed’s purchases. BlackRock’s $20 billion iShares iBoxx High Yield Corporate Bond ETF, the largest junk-debt ETF, attracted a record monthly inflow of $3.7 billion in April. Meanwhile, the $46 billion iShares iBoxx $ Investment Grade Corporate Bond ETF has rallied roughly 12.5% since the Fed’s initial announcement in March.
(Updates with Powell quote in final paragraph.)
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