Giants benefit in bond buying

The Federal Reserve bought $428 million in bonds of individual companies through mid-June, making investments in household names like Walmart and AT&T as well as in major oil firms, tobacco giant Philip Morris and a utility subsidiary of billionaire Warren Buffett’s Berkshire Hathaway.

The transactions disclosed Sunday are the first individual company bond purchases made by the Fed under new programs set up to nurse the economy through the coronavirus pandemic. The Fed also added $5.3 billion in 16 corporate bond exchange traded funds, including a newly added sixth highyield fund.

The aim is to ensure companies can continue to finance themselves, and not be forced out of business due to problems raising cash during a pandemic. The program is backed by investment capital from the US Treasury to absorb any losses should corporations default.

The initial round of purchases included some 86 issuers, about half of them contractually settled as of June 18 and some still underway, all bought on the secondary market. That is a small slice of the more than 790 issuers whose bonds the Fed has said in a separate release were eligible for purchase.

But it was still a first foray into corporate bond purchases that spread broadly across the economy, touching firms like Gilead Sciences that are involved in developing treatments for COVID-19.

Both the Bank of Japan and the European Central Bank have programs to buy individual corporate bonds, but the Fed only added that to its arsenal in light of the Depression level risks posed by the pandemic.

The largest purchases were of bonds issued by AT&T and the United Health Group, with the Fed buying around $16.4 million of bonds from each.

Issuers in the energy industry accounted for about 8.45 percent of the bonds purchased.