Fed Discloses it Bought Tiny Amounts of Corporate Bonds, Including a Whopping $15.5 Million (with an M) in Junk Bonds

Here are the 84 companies whose bonds the Fed bought, and the 16 bond ETFs it now holds.

By Wolf Richter for WOLF STREET.

The Federal Reserve disclosed Sunday afternoon the amounts and the company names of the corporate bonds that it started buying for the first time ever in the week ended Friday, June 19. They’re not even rounding errors on the Fed’s balance sheet. The purchases of individual corporate bonds amounted to $428 million (with an M). By comparison, in the week ended April 1, when the Fed was doing a lot of heavy breathing, it bought $362 billion (with a B) of Treasury securities.

In addition, the Fed said in the disclosure that it held a total of $6.8 billion in bond ETFs as of June 19, up from $1.5 billion a month ago.

These bond ETFs and individual corporate bonds combined account for 1/10th of 1% of the Fed’s $7.1 trillion in total assets.

The Fed buys these corporate bonds and bond ETFs in its Special Purpose Vehicle that it calls Secondary Market Corporate Credit Facility (SMCCF). Like the Fed’s other alphabet-soup bailout SPVs, the SMCCF is an LLC entity.

The SPV is funded in two ways: One, with equity capital provided by the US Treasury Department, or rather by taxpayers, or rather by government borrowing, to cushion the Fed against losses; and two, by loans from the Fed at a leverage of 10 to 1. Then the SPV buys corporate bonds and bond ETFs in the open markets via the Fed’s primary dealers. The New York Fed handles all the details.

All these purchases and holdings were already reflected on the Fed’s prior weekly balance sheets in terms of the total amounts. Today’s disclosure just provides the company-specific details.

The Nitty Gritty.

The bonds that the Fed purchased were issued by 84 companies, in industries ranging from tobacco to video games, across the spectrum of US companies, and US subsidiaries of foreign companies (such as Toyota’s US finance subsidiary). The issuers include several of Warren Buffett’s companies, all kinds of energy companies, and some junk-rated companies, such as Ford.

But not a lot of junk on the list.

In terms of junk bonds, there isn’t much. Only 3.62% of its bond portfolio is now rated BB (BB+, BB, BB-), the top category of junk. This includes Ford (BB+). The Fed did not buy any bonds rated CCC or below. With 3.62% of the total corporate bond portfolio ($428 million) being junk bonds, the amount of junk bonds it holds come to $15.5 million.

The categories AAA, AA, and A account for 48.07% of the bonds. The category of BBB, the lowest investment-grade category, accounts for 48.31%.

The average maturity of the bonds is 3.3 years, ranging from 11 months (a Chevron bond that matures in May 2021) to five years (a Honeywell bond that matures in June 2025). Significantly, there are no long-dated maturities in this portfolio.

When these bonds mature, the company pays the Fed face value of the bonds, and the bond disappears off the Fed’s balance sheet. If the maturing bond is not replaced, the SPV can use the proceeds to pay down the loan the Fed issued.

By keeping maturities in the one-to-five-year range, the Fed appears to be setting the stage for letting the bonds roll off its balance sheet and be done with the program once the crisis is over.

AT&T is at the top of the list, with $16.5 million of bonds. The smallest position is Hyatt at $1.09 million – just symbolically dabbling here, really, since hotel bonds could get dicey.

There are also bonds from Southwest, but no bonds issued by American Airlines, Delta, or United, which would have spiced up the portfolio in a nerve-wracking manner for sure.

The table below shows the companies whose bonds the Fed purchased. If the Fed purchased several types of bonds from one company, or from a company’s subsidiary, I added them together. For example, the bonds of IBM Corp and IBM Credit are added together under “IBM.”

Issuer Maturity Date Purchase Amount $
1 AT&T INC 07/15/2021 16,476,295
2 UNITEDHEALTH GROUP 07/15/2022 16,451,866
3 COMCAST 04/15/2024 13,315,347
4 ANTHEM 05/15/2022 12,937,096
5 IBM 05/13/2022 10,631,583
6 MICROSOFT 02/06/2022 8,855,357
7 WALMART 06/26/2023 8,758,532
8 CONSTELLATION BRANDS 02/15/2023 8,465,435
9 FORD MOTOR COMPANY 04/21/2023 8,051,573
10 CVS HEALTH CORP 03/25/2025 7,762,008
11 BOEING CO 05/01/2023 7,648,613
12 GENERAL ELECTRIC CO 09/07/2022 7,403,280
13 ABBVIE INC 10/01/2022 7,394,460
14 MEDTRONIC INC 03/15/2022 6,658,502
15 COCA-COLA CO 03/25/2025 6,652,748
16 PEPSICO INC 04/30/2025 6,637,973
17 SABINE PASS LIQUEFACTION 03/15/2022 6,512,097
18 MCDONALD’S CORP 01/15/2022 6,488,806
19 BECTON DICKINSON AND CO 06/06/2022 6,342,504
20 PHILIP MORRIS INTL 11/10/2024 6,236,320
21 BERKSHIRE HATHAWAY ENERG 04/15/2025 5,774,200
22 PROLOGIS LP 08/15/2023 5,622,744
23 MARATHON PETROLEUM 05/01/2025 5,543,247
24 GENERAL MILLS 10/17/2023 5,535,298
25 FLORIDA POWER & LIGHT 04/01/2025 5,506,758
26 LOWE’S COS 04/15/2022 5,492,097
27 PFIZER INC 09/15/2023 5,458,757
28 SYSCO CORPORATION 03/15/2025 5,452,704
29 BP CAP MARKETS AMERICA 04/06/2025 5,433,591
30 MASTERCARD 04/01/2024 5,430,832
31 MARRIOTT INTERNATIONAL 05/01/2025 5,416,798
32 GILEAD SCIENCES 09/01/2022 5,331,400
33 EVERSOURCE ENERGY 10/01/2024 5,312,492
34 VISA INC 12/14/2022 5,283,044
35 EXXON MOBIL 08/16/2024 5,211,729
36 WALGREENS BOOTS ALLIANCE 11/18/2021 5,169,408
37 ENERGY TRANSFER OPERATNG 01/15/2024 5,156,184
38 DUPONT DE NEMOURS INC 05/01/2023 5,122,159
39 CHEVRON 05/11/2025 5,113,264
40 TOYOTA MOTOR CREDIT 08/25/2023 5,070,899
41 CATERPILLAR FINL SERVICE 05/13/2022 5,045,104
42 PACCAR FINANCIAL 04/06/2023 4,756,010
43 FOX CORP 01/25/2024 4,509,400
44 HEALTHPEAK PROPERTIES 08/15/2024 4,469,758
45 INTERCONTINENTALEXCHANGE 10/15/2023 4,461,760
46 FISERV INC 10/01/2023 4,412,613
47 DELMARVA PWR & LIGHT CO 11/15/2023 4,383,302
48 VMWARE INC 05/15/2025 4,381,185
49 3M COMPANY 04/15/2025 4,356,304
50 EASTMAN CHEMICAL 08/15/2022 4,238,120
51 GEORGIA POWER CO 07/30/2023 4,208,827
52 HP ENTERPRISE CO 04/01/2023 4,143,570
53 CARGILL INC 07/23/2023 4,078,236
54 HUMANA INC 04/01/2025 4,052,405
55 AUTOZONE INC 04/15/2025 3,376,393
56 DTE ELECTRIC CO 03/01/2025 3,373,695
57 FEDEX CORP 05/15/2025 3,360,613
58 BURLINGTN NORTH SANTA FE 09/01/2024 3,339,810
59 VIRGINIA ELEC & POWER 05/15/2025 3,300,755
60 AVANGRID INC 04/15/2025 3,288,007
61 PROCTER & GAMBLE 03/25/2025 3,266,060
62 PHILLIPS 66 04/01/2022 3,227,510
63 PAYPAL HOLDINGS 10/01/2024 3,201,220
64 UNITED PARCEL SERVICE 04/01/2023 3,174,262
65 HONEYWELL INTERNATIONAL 06/01/2025 3,072,735
66 DIAMONDBACK ENERGY INC 12/01/2024 3,007,643
67 CAMPBELL SOUP CO 03/15/2025 2,847,410
68 REALTY INCOME CORP 08/01/2023 2,799,115
69 CME GROUP INC 03/15/2025 2,785,633
70 FIRSTENERGY CORP 03/15/2023 2,736,443
71 REPUBLIC SERVICES INC 08/15/2024 2,682,653
72 EDISON INTERNATIONAL 11/15/2024 2,651,085
73 HOME DEPOT INC 06/01/2022 2,613,999
74 NUCOR CORP 06/01/2025 2,584,961
75 ARES CAPITAL CORP 06/10/2024 2,562,600
76 GENERAL MOTORS FINL CO 03/20/2023 2,156,573
77 NIKE INC 03/27/2025 2,154,373
78 DOLLAR GENERAL CORP 04/15/2023 2,140,035
79 WILLIAMS COMPANIES INC 03/15/2022 2,103,140
80 SOUTHWEST AIRLINES 05/04/2023 2,102,015
81 PHILLIPS 66 PARTNERS LP 12/15/2024 2,069,484
82 DUKE ENERGY CORP 04/15/2024 1,663,630
83 ACTIVISION BLIZZARD 06/15/2022 1,558,645
84 HYATT HOTELS CORP 04/23/2025 1,090,262

Corporate Bond ETFs.

At the end of May, the Fed disclosed that it had purchased $1.5 billion in corporate bond ETFs through May 18. Since then, the Fed has purchased more bond ETFs, and the market value as of June 18 of all its ETF holdings combined had increased to $6.8 billion.

This includes several junk-bond focused ETFs, but the amounts are small. For example, its holdings of the popular iShares iBoxx High Yield Corporate Bond ETF [HYG] are only $245.8 million:

Ticker Fund Name Market Value, June 18, $ 
LQD iShares iBoxx US Dollar Investment Grade Corporate Bond ETF 1,782,971,624
VCSH Vanguard Short-Term Corporate Bond ETF 1,307,906,475
VCIT Vanguard Intermediate-Term Corporate Bond ETF 1,037,071,572
IGSB iShares Short-Term Corporate Bond ETF 607,806,116
JNK SPDR Bloomberg Barclays High Yield Bond ETF 411,874,114
SPIB SPDR Portfolio Intermediate Term Corporate Bond ETF 404,663,795
IGIB iShares Intermediate-Term Corporate Bond ETF 397,995,018
HYG iShares iBoxx High Yield Corporate Bond ETF 245,782,706
SPSB SPDR Portfolio Short Term Corporate Bond ETF 237,257,161
USIG iShares Broad US Dollar Investment Grade Corporate Bond ETF 150,392,808
HYLB Xtrackers US Dollar High Yield Corporate Bond ETF 56,224,553
USHY iShares Broad US Dollar High Yield Corporate Bond ETF 49,015,670
SLQD iShares 0-5 Year Investment Grade Corporate Bond ETF 43,799,540
ANGL VanEck Vectors Fallen Angel High Yield Bond ETF 28,862,665
SHYG iShares 0-5 Year High Yield Corporate Bond ETF 23,341,086
SJNK SPDR Bloomberg Barclays Short Term High Yield Bond ETF 20,741,161

Going forward…

The Fed will likely continue to buy some corporate bond ETFs and individual corporate bonds. But the bond market is currently red-hot. Spreads have tightened. And even American Airlines and Carnival Corp were able to issue new bonds though their revenues have collapsed. They need billions of dollars in new fuel to burn to get through this crisis, and they got the first pile of it from investors.

The Fed looks at this as a sign of success – that it essentially has done its job to keep credit flowing to these companies, and that it really doesn’t need to do much more. So now, it’s dabbling in these bond purchases, dabbling by Fed standards, where big moves are counted in hundreds of billions of dollars, not in millions or a few billion.

On the other side of the coin.

In reality, the Fed has been pushing up bond prices and stock prices to bail out asset holders so that they have absolutely no skin in the crisis, and this strategy has widened by a massive amount the already huge wealth disparity between asset holders and labor in the US – and the bigger the asset holders, the more they got from the Fed.

It also creates the notion that the Fed will always bailout asset holders, and that there is never a price to pay for any downturns, and that only people who work for a living have to pay that price.

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