MNI POLICY: Fed Corporate Debt Buys, Flexible, Could Increase​

The Federal Reserve's purchases of corporate debt will remain flexible based on market conditions and could be ramped up, New York Fed executive vice president Daleep Singh said on Tuesday.

The pace of the central banks' secondary marker corporate credit facility "purchases is dependent on measures of market functioning and market volumes" and "if market stress were to return and our purchase pace were to increase, we would initially focus our support primarily through direct purchases of corporate bonds," he said, adding that, in a scenario of significant market stress, the Fed would buy bonds and ETFs.

The Fed's USD13 billion in purchases of corporate bonds and committed backstops have provided enormous benefits to the country, Singh said at a U.S. Chamber of Commerce's Center for Capital Markets Competitiveness event Tuesday. Still, the Fed wants to remain cautious to avoid encouraging "moral hazard" risk by propping up expectations of an official sector backstop, he said, adding that there are reasons to believe that such risks are "muted in the current circumstance" of a rare pandemic.