In rescue effort, Fed has broad stake in corporate America's fortunes

[May 30, 2020]  By Dan Burns and Ann Saphir

(Reuters) - The U.S. central bank now has a stake in the fortunes of a broad swath of corporate America after buying about $1.3 billion of bond funds with debt issued by firms in all walks of the world's biggest economy, from Apple Inc <AAPL.O> to a clutch of companies in bankruptcy.

The details on holdings in the Fed's Secondary Market Corporate Credit Facility, one of nearly a dozen emergency programs the Fed has rolled out since March to respond to the coronavirus crisis, were published Friday.

The Fed's largest investment-grade fund holding - iShares iBoxx US Dollar Investment Grade Corporate Bond ETF <LQD.P> - contains 30 Apple bonds giving the Fed about $5.7 million of exposure to the maker of iPhones through that ETF alone as of May 19. Apple is also a holding in other ETFs the Fed bought.

The largest of the facility's junk bond fund holdings - iShares iBoxx High Yield Corporate Bond ETF <HYG.P> - gives the Fed around $25,000 of exposure to three companies that have filed for bankruptcy since the health crisis erupted, including $14,000 to car rental company Hertz, $10,000 to retailer JC Penney, and $1,500 to department store operator Neiman Marcus.

All told the Fed made 158 purchases of shares in 15 exchange-traded funds from May 12 and May 18, the data showed.

Until the health crisis, the Fed had bought U.S. Treasuries and government-backed bonds. The SMCCF's purchases of bond ETFs represent entirely new territory.

LQD, the third largest U.S. taxable bond ETF, holds bonds from such banks as Bank of America Corp <BAC.N> and Wells Fargo & Co <WFC.N>, as well as telecom operators AT&T Inc <T.N> and Verizon Communications Inc <VZ.N>. The fund was the Fed facility's largest holding, at $326.3 million.

The SMCCF also bought shares in six of the seven largest ETFs devoted to high-yield - or junk - bonds, accounting for $223.4 million, of 17% of its overall portfolio.

The Fed's investment in HYG was just over $100 million.

(Reporting By Dan Burns and Ann Saphir; editing by Grant McCool)

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