As part of its crisis-fighting measures, the Fed also launched a slew of emergency facilities, including one where it bought corporate bonds for the first time. Corporate exchange-traded funds, as well as the stock market more broadly, surged in 2020.
Kaplan’s disclosure shows that he bought and sold iShares Floating Rate Bond ETF, which tracks the level of bonds under five years of maturity. The Fed, through its adjustments to the fed funds rate, directly influences the price of short-term notes.
“Doing things like this, although not prohibited by the rules, shows poor judgment and really hurts the reputation of the Fed,” said Roberto Perli, a partner at Cornerstone Macro LLC and a former Fed economist. “Good that he and Rosengren said that they won’t trade again as long as they are presidents. But the damage to the institution is done.”
--With assistance from Steve Matthews.
This article was provided by Bloomberg News.