March 4, 2020 / 4:49 PM / a month ago

U.S. corporate bonds gain as stocks rally

NEW YORK, March 4 (Reuters) - U.S. investment-grade and high-yield corporate bond funds saw prices rise and yields fall on Wednesday as Wall Street rallied following the surge of moderate Democratic candidate for president Joe Biden in the Super Tuesday primaries.

The investment-grade market hit all-time highs, while junk bonds also benefited as risk appetite began to reappear after fears about the economic effects of the coronavirus outbreak had sent investors into safe-haven assets since mid-February.

In the investment-grade market, the trade price of the iShares iBoxx Investment Grade Corporate Bond ETF was up 0.43%, having hit a fresh all-time high of $134.05 in early trade. The PIMCO Investment Grade Corporate Bond ETF was last up 0.53%, a hair lower than the all-time high of $114.24 hit earlier.

Both funds broke out of their ranges to hit all-time highs after the Fed announced it would cut interest rates to cushion the effects of the coronavirus on the U.S. economy.

In the riskier high-yield market, the trade price of the iShares iBoxx High Yield Corporate Bond ETF was up 1.11% and the SPDR Bloomberg Barclays High Yield Bond ETF was up 1.06%. Prices of both ETFs had ultimately fallen yesterday after the Fed announcement.

“With equities positive and somewhat approaching flat between today and yesterday and the fact that the Fed has said we’re going to keep interest rates low for longer and maybe coordination, I think people are going to buy high yield,” said Andrew Brenner, head of international fixed income at NatAlliance Securities.

U.S. corporate bond indexes saw yields fall and prices rise yesterday, though exchange-traded funds and equities fell. The ICE/BofA U.S. investment grade index yesterday hit an all-time low yield of 2.38%, an all-time high price of $3386.55 and saw its spread over Treasuries near its widest for the year at 132 basis points, in range with the prior two trading days.

The ICE/BofA U.S. high-yield corporate index saw prices pick up and its yield fall to 5.72% from 5.93% the day prior. Its spread over Treasury yields narrowed to 484 basis points, having widened to a two-year high on Monday.

Reporting by Kate Duguid; Editing by Steve Orlofsky

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