Bonds News

UPDATE 1-NY Fed to begin to sell corporate bond holdings on July 12

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July 8 (Reuters) - The New York Federal Reserve said on Thursday it will begin to sell the U.S. central bank’s corporate bond holdings on July 12, entering the next phase of unwinding a portfolio acquired to help offset the economic damage from the coronavirus pandemic.

The sales of corporate bonds held in the Secondary Market Corporate Credit Facility will be “gradual and orderly,” taking liquidity conditions into account and aiming to minimize the potential for disruptions in the market, the New York Fed said in a statement.

The Fed began to offload its portfolio of exchange-traded funds that invest in corporate bonds on June 7. The facility had about $13.8 billion of loans outstanding as of May 31, including $8.6 billion in ETF holdings and $5.1 billion in corporate bonds, according to data from the central bank.

The corporate credit facility was announced in the early months of the pandemic to backstop credit markets and help prevent layoffs. While it was not heavily used, Fed officials said announcing the facility helped to stabilize markets and keep credit flowing to households and businesses.

The unwinding of the facility is not related to the Fed’s monetary policy decisions. Fed policymakers separately are discussing how and when to scale back the central bank’s monthly purchases of $80 billion in Treasuries and $40 billion in mortgage-backed securities. (Reporting by Jonnelle Marte Editing by Paul Simao)