Mish, The Secondary Market Corporate Credit Facility (SMCCF) SPV set…

Ccarman

Mish,

The Secondary Market Corporate Credit Facility (SMCCF) SPV set up to buy Corporate Bonds / Corporate Bond ETFs is a backdoor for the Fed to buy Junk Bonds with Taxpayer backing. Both LQD and VCLT holdings are approximately 50% BBB Rated (see attached breakdown from Yahoo Finance). Even before the current crisis, many of these BBB rated bonds were sketchy- now most of them are essentially soon to be rated Junk. Note the ratings agencies are even now lowering sovereign ratings, so there's no way they will face the criticisms on other debt like they faced in 2008/2009. The SPV for the SMCCF is backed by the Treasury (you and I as taxpayers). We are backstopping a massive corporate bailout again. Please get the word out- taxpayers should be outraged by this.

Comments (2)
No. 1-2
hmk
hmk

Free market capitalism is dead. Crony capitalism is alive and well. We have the best government money can buy. This is how communism gets its footing. When the proletariat finally realize they have been screwed one to many times by the elitists a revolution starts. Unfortunately it will be more cowbell instead of beheading the elitists and having a fresh start.

neverletthetruth
neverletthetruth

I am assuming they would need to sell bonds that get downgraded from the ETFs. Also FED can only own up to 20% of the ETF I believe. I think there are also provisions that they can only buy if the NAV is within a certain tolerance.