The Federal Reserve could pause its unprecedented rescue of the corporate bond market if conditions keep improving, a New York Fed official said Wednesday.
The controversial program, called the Secondary Market Corporate Credit Facility, has already scooped up about $10 billion of corporate debt, including junk bonds and ETFs.
Those purchases -- and the mere announcement of the intervention in late March -- have unfrozen the critical debt market. Critics argue the Fed is distorting market functioning and propping up "zombie companies that don't deserve to exist."
The NY Fed has already begun taking its foot off the pedal.
Corporate debt purchases have slowed from about $300 million per day to under $200 million a day, Daleep Singh, executive vice president at the NY Fed, said in a speech.
"If market conditions continue to improve, Fed purchases could slow further, potentially reaching very low levels or stopping entirely," Singh said.
The comments briefly spooked investors.
The iShares iBoxx Investment Grade Corporate Bond ETF (LQD) dipped after the 10 am ET speech before recovering.
Singh stressed that halting purchases would not mean the program's doors were closed, but that "markets are functioning well."
"Should conditions deteriorate, purchases would increase," he said.