Why is the Federal Reserve lending money to Apple?

Linda J. Dodson

Under the SMCCF, and a later primary market scheme which buys directly from the companies rather than debt which is already in investors’ hands, the Fed will buy up to $750bn of notes.

“The availability of credit has contracted for corporations and other issuers of debt while, at the same time, the disruptions to economic activity have heightened the need for companies to obtain financing,” the Fed said.

“These disruptions have been felt by even highly rated companies that need liquidity in order to pay off maturing debt and sustain themselves until economic conditions normalise.”

Buying these bonds pushes down interest rates in the market, making it cheaper for businesses to borrow. It gives investors confidence they can sell on any bonds they have bought. And it immediately gives them more cash to re-invest, stimulating more lending.

It is an extraordinary scheme for extraordinary times, and comes alongside programmes to lend to local governments and even high street businesses – initiatives far in excess of anything attempted in the financial crisis, and reflecting the lack of space to use conventional interest rate cuts to get the job done.

But when it comes to buying big companies’ bonds, the Fed is not alone.

Source Article

Next Post

Landlords help Monsoon save more stores

Monsoon Accessorize is to keep 57 more stores open than initially planned after a raft of landlords agreed to new turnover-based rents.  The failed chain’s administrator FRP Advisory now hopes to preserve 157 of the company’s 230 branches, saving 2,400 jobs following its collapse in the middle of lockdown. Sites will reopen by the end of […]

You May Like