Fed buys more corporate bonds but may soon end purchases

WASHINGTON» The Federal Reserve said Friday that it purchased $1.3 billion in corporate bonds in late June as part of its effort to keep U.S. interest rates low and ensure large companies can borrow by selling bonds.

The Fed bought bonds issued by several hundred large companies, including AT&T, PepsiCo, and Berkshire Hathaway, the conglomerate controlled by billionaire Warren Buffett. Combined with purchases from earlier in the month, the Fed has bought nearly $1.8 billion in corporate debt.

The purchases are intended to keep interest rates on corporate bonds from spiking, which would make it harder for companies to borrow by selling debt.

The Fed’s announcement in March that it would, for the first time, purchase corporate debt quickly boosted trading in corporate bonds and brought down interest rates in that market.

The Fed is buying bonds from a wide range of companies to mimic a broad market index, in order to avoid favoring any specific industry. Last month it bought bonds issued by UPS, Home Depot, oil and gas pipeline company Kinder Morgan, and drugstore chain CVS.

The Fed has also purchased nearly $8 billion in pools of bonds held in exchange-traded funds, which operate similarly to mutual funds.