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

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

by Simon Gilchrist, Bin Wei, Vivian Z. Yue and Egon ZakrajšekWe evaluate the efficacy of the Secondary Market Corporate Credit Facility (SMCCF), a program