Nina Boyarchenko, Richard Crump, Anna Kovner, Or Shachar, and Peter Van Tassel

On April 9, the Federal Reserve announced that it would take additional actions to provide up to $2.3 trillion in loans to support the economy in response to the coronavirus pandemic. Among the initiatives are the Primary Market and Secondary Market Corporate Credit Facilities (PMCCF and SMCCF), whose intent is to provide support for large U.S. businesses that typically finance themselves by issuing debt in capital markets. Corporate bonds support the operations of companies with more than 17 million employees based in the United States and these bonds are key assets for retirees and pension funds. If companies are unable to issue corporate bonds, they may be unable to invest in inventory and equipment, meet current liabilities, or pay employees. Maintaining access to credit is thus crucially important during the COVID-19 pandemic, both for issuing companies and for their employees. This post documents the dislocations in the corporate bond market that have motivated the creation of these facilities and explains how we expect these facilities to support U.S. businesses and their employees both through the COVID-related disruptions and beyond, when the economy recovers.