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Federal Reserve’s Fallen Angel Bond Buying Won’t Catch Them All

  • Bonds of Ford Motor and Macy’s will be eligible for program
  • Occidental Petroleum will miss out, but its bonds still rally
The Marriner S. Eccles Federal Reserve building stands in Washington, D.C., U.S., on Tuesday, Oct. 23, 2012. Federal Reserve Chairman Ben S. Bernanke, who is seeking to spur the economy with a third round of so-called quantitative easing, has said his stimulus works by lowering borrowing costs and encouraging investors to seek higher-yielding assets.
Photographer: Andrew Harrer

The Federal Reserve is throwing a lifeline to some companies that have suddenly dropped into risky junk debt after expanding its corporate bond-buying program to include fallen angels. But it won’t catch every one.

The central bank will now buy debt of companies that were investment-grade rated as of March 22, and subsequently downgraded to no lower than BB-, or three levels into high-yield, according to a statement Thursday. That date, which determines whether bonds are eligible for purchase, heralds winners and losers among the recent crop of issuers that have lost their high-grade standing.