This is not accurate. A "plummet" in value when it comes to the fallen angels that the Fed is purchasing is more like a 10% drop, and even if you treat the difference between the "true" value of the bonds (if the Fed didn't purchase them) and what the Fed pays as a surplus, the aggregate value of all those surpluses is still tiny in the grand scheme of things.
It likely would have fallen even further, until the fed decided to intervene and buy corporate bond ETFs.
Now LQD has fully recovered and is back to pre-corona virus levels.
More interesting is the rebound in HYG, another Corp bond ETF, which is 50% BB rating, and the remaining 50% below BB rating. I imagine those will get downgraded and be even worst.
Now what happens when companies can’t meet their debt obligations is that covenants will get triggered and that can mean a whole lot of bad things for corporate debt. Which the federal reserve now holds because nobody else wants it.
Yes, this is a good methodology: we should take the lowest point of a random ETF, extrapolate it out, and use that number in our analysis of the Fed's actions.
edit: they edited their comment extensively after I sent this haha.
