How new Fed corporate bond programs cushioned the Covid-19 recession

Michael D. Bordo, John V. Duca

Research output: Contribution to journalArticlepeer-review

4 Scopus citations


In the financial crisis and recession induced by the Covid-19 pandemic, many investment-grade firms became unable to borrow from securities markets. In response, the Fed not only reopened its commercial paper funding facility but also announced it would purchase newly issued and seasoned corporate bonds rated as investment grade before the Covid pandemic. We assess the effectiveness of this program using long sample periods, spanning the Great Depression through the Great and Covid Recessions. Findings indicate that the announcement of corporate bond backstop facilities helped stop risk premia from rising further than they had by late-March 2020. In doing so, these backstop facilities limited the role of external finance premia in amplifying the macroeconomic impact of the Covid pandemic. Nevertheless, the corporate bond programs blend the roles of the Federal Reserve in conducting monetary policy via its balance sheet, acting as a lender of last resort, and pursuing credit policies.

Original languageEnglish (US)
Article number106413
JournalJournal of Banking and Finance
StatePublished - Mar 2022
Externally publishedYes

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics


  • Corporate bond facility
  • Corporate bonds
  • Credit easing
  • Federal Reserve
  • Financial crises
  • Lender of last resort


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