The U.S. Federal Reserve on Sunday released a list of roughly 750 companies, including Apple, AT&T, Jack Daniel’s, 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, due to the COVID-19 economic disruptions.
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…
The Fed said two weeks ago that it would seek to mimic a broad market index approach and purchase bonds from a wide range of companies. Consumer product companies, such as Quaker Oats and the distiller Brown-Forman, which makes Jack Daniel’s and Woodford Reserve whiskeys, make up roughly a third of the index. That sector is followed by utilities at 10% and energy firms at more than 9%. The index also includes insurance companies but no banks.
MacDailyNews Take: Apple bonds find yet another buyer.