With U.S. markets slaughtered by COVID-19, Congress authorized the Federal Reserve to lend directly to many companies by buying up corporate bonds.The $250 billion injected helped many otherwise healthy balance sheets weather the financial storm. Of the $1.3 billion in funds whose recipients have been disclosed so far, roughly 8% went to fossil fuel-related bonds―even though the oil, gas and coal sector comprises just 3% of the S&P Composite 1500 stock index.
But the fossil fuel sector’s credit rating was spiraling downward well before COVID-19. Of that nearly $100 million known to be directed to the industry, $22 million went to prop up bonds with such low credit ratings they’re considered non-investment grade―“junk” bonds. And fossil fuel bonds in general look likely to become riskier in the future.
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