The US Federal Reserve Board announced that it plans to begin winding down the portfolio of the Secondary Market Corporate Credit Facility (SMCCF), a temporary emergency lending facility launched during the Covid-19 pandemic last year.

“The SMCCF proved vital in restoring market functioning last year, supporting the availability of credit for large employers, and bolstering employment through the pandemic,” the Fed said in a statement on Wednesday.

“SMCCF portfolio sales will be gradual and orderly, and will aim to minimize the potential for any adverse impact on market functioning by taking into account daily liquidity and trading conditions for exchange traded funds and corporate bonds,” the Fed said, adding the Federal Reserve Bank of New York, which manages the operations of the SMCCF, will announce additional details before sales begin.

The SMCCF, which stopped purchasing assets at the end of 2020, held around $5.21 billion of bonds from companies and $8.56 billion of exchange traded funds that hold corporate debt as of April 30, Xinhua news agency quoted The Wall Street Journal as saying in a report.

A Fed official said the sales should be completed by the end of this year and net proceeds will be remitted to the Treasury Department, the Journal reported.

A Federal Reserve spokeswoman told Bloomberg News that the portfolio wind-down has nothing to do with monetary policy, and it is not a signal about monetary policy.

The Fed has pledged to keep its benchmark interest rates unchanged at the record-low level of near zero, while continuing its asset purchase program at least at the current pace of $120 billion per month, until the economic recovery makes “substantial further progress”.

–IANS

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