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NY Fed's Singh says Fed would offer flexible support to corporate bond market if stress arises

·1-min read

Oct 20 (Reuters) - The Federal Reserve's actions to unfreeze credit markets had a significant effect on the corporate bond market, despite a small footprint, and the central bank would take a flexible approach to providing more support if needed, a senior Fed official said on Tuesday.

The announcement in March that the Fed would begin to purchase corporate bonds through its corporate credit facilities helped to calm markets and lower borrowing costs, ensuring that companies could access credit, said Daleep Singh, executive vice president at the New York Fed.

"The ultimate goal of these facilities was to provide a bridge for U.S. companies and their employees to the other side of the pandemic shock," Singh said in remarks prepared for a virtual event organized by the Chamber of Commerce.

The Fed purchased exchange-traded funds and individual corporate bonds through its secondary market corporate credit facility, and it reduced the scale of those purchases as markets improved, Singh noted. It stopped purchasing exchange-traded funds altogether in late July.

However, the Fed stands ready to increase purchases if needed and it would take a flexible approach, Singh said. It would focus first on "direct purchases of corporate bonds" and then purchase ETFs if there was "significant market stress," he said.

"By varying both the amount and type of purchases, we are able to provide flexible support to the market," Singh said. (Reporting by Jonnelle Marte; Editing by Andrea Ricci)