Federal Reserve Hires BlackRock to Manage Bond Purchases

The U.S Federal Reserve has hired asset management giant BlackRock to help it execute the purchase of commercial mortgage-backed securities, the Fed announced in a statement on Tuesday.

The US central bank uses BlackRock in an effort to limit the damage coronavirus has done to the country’s economy.

It said in its statement that it had retained BlackRock Financial Markets Advisory to purchase the assets on the Fed’s behalf from primary dealers in the market.

“BlackRock was selected on a short-term basis to serve as an investment manager after considering their expertise in trading and analysing agency CMBS in the secondary market, and robust operational and technological capabilities,” the Fed said.

The Fed will determine which securities guaranteed by Fanny Mae, Freddie Mac and Ginnie Mae are suitable for purchase. BlackRock will execute the trades.

The firm will also manage two large bond-buying programs and is going to be in charge of a fed-backed facility to buy investment-grade bonds from U.S. companies.

Additionally, Blackrock will oversee another vehicle for buying already-issued  investment-grade bonds.

The company said it would release more details on the terms and conditions of the purchasing program in due course and would not discuss any purchases with dealers until then.

Large banks were told that the Fed still expected them to submit the capital plans for the central bank’s annual stress tests by the original April 6 deadline.

The Fed said it will give banks more time to address non-critical examiner issues and will temporarily reduce examination activities at banks.

It will reach out to firms in order to help them manage the challenges and risks brought on by the pandemic.

In a different statement that Fed said that the Board recognizes that the current situation is significantly affecting areas of the country in different ways and will work with financial institutions to understand the specific issues they are facing.

(Photo: Wikimedia Commons)

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