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Which Corporate Bonds the Fed Has Bought So Far?

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Earlier this month, the Federal Reserve announced it would begin buying individual corporate bonds. Now we have our first glimpse at what that means in practice.

On Saturday, the Fed released a disclosure statement that lists the bonds purchased by the central bank.

The amount so far is relatively modest $428 million. Junk bonds made up $15.5 million of that total.

So far, the Fed has engaged in its intervention into the corporate bond market primarily through the purchase of corporate ETFs. The central bank holds a total of $6.8 billion in bond ETFs as of June 19. That was up from $1.5 billion a month ago.

The Federal Reserve purchases corporate debt via the so-called Secondary Market Corporate Credit Facility (SMCCF). The US Treasury gave the Fed $25 billion for SMCCF as part of the CARES Act. The central bank can leverage that 10-to-1 to buy up to $250 billion in corporate paper. The Fed will create the additional $225 billion out of thin air.

The SMCCF bought bonds from 84 companies. WolfStreet summarized the portfolio this way.

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.”

According to WolfStreet’s analysis, the average bond maturity in the Fed’s portfolio comes in at 3.3 years. Maturities range from 11 months (a Chevron bond that matures in May 2021) to five years (a Honeywell bond that matures in June 2025). So far, the Fed is not holding any bonds with long-dated maturities.

AT&T topped the list. The Fed has purchased $16.5 million in that company’s debt.

One has to wonder how the Fed chooses the bonds it buys. Regardless of the criteria, the central bank is ultimately picking winners and losers. For instance, the Fed bought Southwest Airlines bonds, but you won’t find any on the list from American Airlines, Delta, or United.

Following is a list of bond purchases by the Fed along with maturity rates and total amounts compiled by WolfStreet.

1AT&T INC07/15/202116,476,295
2UNITEDHEALTH GROUP07/15/202216,451,866
8CONSTELLATION BRANDS02/15/20238,465,435
9FORD MOTOR COMPANY04/21/20238,051,573
10CVS HEALTH CORP03/25/20257,762,008
11BOEING CO05/01/20237,648,613
12GENERAL ELECTRIC CO09/07/20227,403,280
13ABBVIE INC10/01/20227,394,460
14MEDTRONIC INC03/15/20226,658,502
15COCA-COLA CO03/25/20256,652,748
16PEPSICO INC04/30/20256,637,973
17SABINE PASS LIQUEFACTION03/15/20226,512,097
18MCDONALD’S CORP01/15/20226,488,806
19BECTON DICKINSON AND CO06/06/20226,342,504
20PHILIP MORRIS INTL11/10/20246,236,320
21BERKSHIRE HATHAWAY ENERG04/15/20255,774,200
22PROLOGIS LP08/15/20235,622,744
23MARATHON PETROLEUM05/01/20255,543,247
24GENERAL MILLS10/17/20235,535,298
25FLORIDA POWER & LIGHT04/01/20255,506,758
26LOWE’S COS04/15/20225,492,097
27PFIZER INC09/15/20235,458,757
28SYSCO CORPORATION03/15/20255,452,704
29BP CAP MARKETS AMERICA04/06/20255,433,591
31MARRIOTT INTERNATIONAL05/01/20255,416,798
32GILEAD SCIENCES09/01/20225,331,400
33EVERSOURCE ENERGY10/01/20245,312,492
34VISA INC12/14/20225,283,044
35EXXON MOBIL08/16/20245,211,729
36WALGREENS BOOTS ALLIANCE11/18/20215,169,408
37ENERGY TRANSFER OPERATNG01/15/20245,156,184
38DUPONT DE NEMOURS INC05/01/20235,122,159
40TOYOTA MOTOR CREDIT08/25/20235,070,899
41CATERPILLAR FINL SERVICE05/13/20225,045,104
42PACCAR FINANCIAL04/06/20234,756,010
43FOX CORP01/25/20244,509,400
44HEALTHPEAK PROPERTIES08/15/20244,469,758
46FISERV INC10/01/20234,412,613
47DELMARVA PWR & LIGHT CO11/15/20234,383,302
48VMWARE INC05/15/20254,381,185
493M COMPANY04/15/20254,356,304
50EASTMAN CHEMICAL08/15/20224,238,120
51GEORGIA POWER CO07/30/20234,208,827
52HP ENTERPRISE CO04/01/20234,143,570
53CARGILL INC07/23/20234,078,236
54HUMANA INC04/01/20254,052,405
55AUTOZONE INC04/15/20253,376,393
56DTE ELECTRIC CO03/01/20253,373,695
57FEDEX CORP05/15/20253,360,613
58BURLINGTN NORTH SANTA FE09/01/20243,339,810
59VIRGINIA ELEC & POWER05/15/20253,300,755
60AVANGRID INC04/15/20253,288,007
61PROCTER & GAMBLE03/25/20253,266,060
62PHILLIPS 6604/01/20223,227,510
63PAYPAL HOLDINGS10/01/20243,201,220
64UNITED PARCEL SERVICE04/01/20233,174,262
65HONEYWELL INTERNATIONAL06/01/20253,072,735
66DIAMONDBACK ENERGY INC12/01/20243,007,643
67CAMPBELL SOUP CO03/15/20252,847,410
68REALTY INCOME CORP08/01/20232,799,115
69CME GROUP INC03/15/20252,785,633
70FIRSTENERGY CORP03/15/20232,736,443
71REPUBLIC SERVICES INC08/15/20242,682,653
72EDISON INTERNATIONAL11/15/20242,651,085
73HOME DEPOT INC06/01/20222,613,999
74NUCOR CORP06/01/20252,584,961
75ARES CAPITAL CORP06/10/20242,562,600
76GENERAL MOTORS FINL CO03/20/20232,156,573
77NIKE INC03/27/20252,154,373
78DOLLAR GENERAL CORP04/15/20232,140,035
79WILLIAMS COMPANIES INC03/15/20222,103,140
80SOUTHWEST AIRLINES05/04/20232,102,015
81PHILLIPS 66 PARTNERS LP12/15/20242,069,484
82DUKE ENERGY CORP04/15/20241,663,630
83ACTIVISION BLIZZARD06/15/20221,558,645
84HYATT HOTELS CORP04/23/20251,090,262

As WolfStreet put it, ” 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.”

Nice work if you can get it.

In effect, the Fed’s foray into the corporate bond market will create artificial demand for corporate debt. It will boost bond prices higher than they otherwise would be and hold interest rates down. Ostensibly, the Fed’s tinkering will make it easier for corporations to borrow money.

In simplest terms, the central bank is manipulating the corporate bond market.

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