Summary of Fed Facilities in Response to Covid-19 Government Shutdown of Economy:
Unlimited QE - UST
• Unlimited open-ended purchases of US Treasury and GSE MBS securitiesQE - MBS
• Purchases of MBS securities backed by US GSEs$1 Trillion Repo Market Interventions
• Purchases of US T-Bills in order to avoid disruption to the short-term Repo marketTALF (Term Asset-Backed Securities Loan Facility)
• Eligible collateral expanded to AAA CMBS and newly issued
collateralized loan obligations. Size of facility remains $100bn. Only
static CLOs will be eligible. Single-asset single-borrower CMBS and
commercial real estate CLOs will NOT be eligible.Municipal liquidity facility
• Total size: Facility is being funded initially by $35bn from the
Treasury using funds from the Exchange Stabilization Fund (ESF) and the
SPV can purchase up to $500bn. As it stands, the SPV will terminate on
September 30, 2020.PPPLF (Paycheck Protection Program Lending Facility)
• Facility established to lend to small businesses under the Paycheck
Protection Program (PPP) of the CARES act, taking PPP as collateral and
with no recourse to borrowerPMCFF (Primary Market Corporate Credit Facility)
• Eligible issuers must be rated at least BBB-/Baa3 as of March 22,
2020. May purchase corporate bonds as sole investor in issuance. May
purchase no more than 25% of syndicated loan or bond at issuance. Corp
bonds & loans levered 10 to 1, other assets levered 7 to 1.
SMCFF (Secondary Market Corporate Credit Facility)
• Eligible issuers must be rated at least BBB-/Baa3 as of March 22,
2020. If downgraded after March 22, rating must be at least BB-/Ba3 on
date that the facility purchases the issuance. ETF purchases will be
aimed at providing exposure to the US IG credit sector with remainder
for ETFs that provide exposure to the US HY credit sector. IG purchases
levered 10 to 1 and HY purchases levered 7 to 1. Other assets levered in
3:1 to 7:1 range depending on risk.
Main Street Lending Program
• Fed will buy 95%, eligible lender will retain 5%, recourse loan up to 4 years.
• Total size: $600bn. Treasury will back it with $75bnSupport for the Paycheck Protection Program
• The Fed also announced details of the new Paycheck Protection Program
Lending Facility. Depository institutions that originate PPP loans are
eligible to borrow from the Fed with the PPP loans - which are
guaranteed by the SBA - as collateral. They will be funded at 35bp,
essentially serving as a discount window for PPP loans. The loans will
remain on bank balance sheet but will not consumer capital - assigned a
risk weight of zero percent under the risk-based capital rules.
