To help address liquidity issues caused by economic impacts of the coronavirus, the Federal Reserve launches a funding backstop for commercial paper markets today.
In a program similar to one used during the 2008 financial crisis, the U.S. central bank becomes a lender of last resort for companies unable to borrow in the short-term market.
The special purpose vehicle will buy higher-rated, three-month unsecured and asset-backed paper from eligible bank, corporate, special-purpose entity, and municipal issuers.
"I don't know if it's going to get a whole lot of utilization," Deborah Cunningham, chief investment officer at Federated Hermes in Pittsburgh, told Fox Business. Still, it adds a floor if spreads get too wide, she said.
Issuers may not like the 10-basis point facility fee they're required to pay, she added.