The Fed is going to buy ETFs. What does it mean?


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The Federal Reserve unleased unlimited QE on Monday and said it would accomplish some of its goals by buying exchange-traded funds.

The Federal Reserve on Monday announced a fresh round of stimulus designed to calm markets and buffer the hit to the economy from the coronavirus pandemic. Among other steps, the Fed said it would buy exchange-traded funds that track the corporate bond market, a first for the U.S. central bank.

“This will provide much-needed liquidity to the bond market and to ETFs,” said Todd Rosenbluth, head of ETF and mutual fund research at CFRA.

Financial markets have been pummeled over the past few weeks. The global oil market has been collapsing just as a virulent pandemic sweeps the world, sapping resources and shutting down economies. Investors across all kinds of markets are racing to “sell everything.”

But the dysfunction may be particularly acute in the market for more highly rated corporate bonds, which aren’t as risky as “high-yield,” or junk-rated, bonds. Investors aren’t…

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