Research from the New York Fed estimates that, within the first three months following the CCF announcement, credit spreads retraced about 90 percent toward pre-pandemic levels, with two-thirds of the improvement occurring on facility announcement dates (i.e., before purchases even began), and that half of the improvement in bid-ask spreads since the peak in March occurred on the initial announcement date itself.14 This provides strong evidence that the market found credible the design the CCFs, as well as the Federal Reserve’s commitment to following through. Improvements in secondary market conditions pass through to corporate borrowing costs in two ways: directly through borrowing rates that are benchmarked to secondary market yields of similar bonds, and indirectly by increasing the willingness of dealers to underwrite bond issuance. And this is precisely what we’ve observed. Since the CCF announcement, firms have raised about $ trillion in the corporate bond market from investors, or about double last year’s pace. Companies have raised new funds and refinanced maturing debt, helping them to maintain their operations and payrolls and build liquidity buffers against continued uncertainty. Importantly, the dramatic improvements in credit conditions have come despite an extremely small CCF footprint that has decreased over time. On account of healthy primary markets, the PMCCF has yet to be tapped. And since mid-May, when we began SMCCF purchases, the pace of our buying has fallen steadily in response to improvements in market functioning.
Together, these efforts allow us to expand the reach of our operations while making tangible progress on our commitments to diversity and inclusion, including to minority-, women-, and veteran-owned firms. Let me now turn to transparency and accountability. In the spirit of these principles, we have reported to the public in near real-time our market activity, including the details of every SMCCF transaction. Our holdings are publicly reported on a weekly basis through the Fed’s H.4.1 release. Every month the Fed publishes the full holdings in a detailed Congressional report. We also provide the attributes of the Broad Market Index, including detailed issuer-level weights. Aside from portfolio activity, we have also disclosed the CCF’s legal agreements. On the New York Fed’s website, you can find all documentation with the Department of Treasury that governs the operation of the facilities, as well as all contracts with external vendors. On the latter, we remain committed to disclosing all fees to service providers as they are paid. Impact on Credit Conditions As you all know, corporate credit conditions have recovered substantially from the worst strains of March.