Report

The Fed takes on corporate credit risk: an analysis of the efficacy of the SMCCF

Bank of International Settlements
September 9, 2021

by Simon Gilchrist, Bin Wei, Vivian Z. Yue and Egon Zakrajšek
We evaluate the efficacy of the Secondary Market Corporate Credit Facility (SMCCF), a program designed to stabilize the U.S. corporate bond market during the Covid-19 pandemic. The Fed announced the SMCCF on March 23, 2020, and expanded the program on April 9. Our results show that the two announcements significantly lowered credit and bid-ask spreads, the former almost entirely through a reduction in credit risk premia.

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