Funds News

Fed pledge on bond-buying expansion revives U.S. junk bond market

NEW YORK, April 14 (Reuters) - Investor demand for the riskiest U.S. corporate credit rose on Monday and Tuesday after the Federal Reserve last week expanded its bond-buying program to include some so-called junk bonds, and pledged to buy shares in exchange-traded funds which track the junk-rated market.

In the primary market, where new debt is sold, issuers in sectors hard-hit by the coronavirus like energy and retail came to market with high-yield bonds. Burlington Coat Factory came to market with a $300 million bond that priced at the low end of the expected range on Monday, signaling investor demand. Ferrellgas Partners also priced a $125 million high-yield bond on Monday.

Prices on existing junk bonds also jumped and the spread of yields over safer Treasuries narrowed as demand picked up. High-yield exchange-traded funds have risen, like the iShares iBoxx High Yield Corporate Bond Fund which is up 6% since the market close on Wednesday, before the Fed’s announcement.

The spread of the ICE/BofA high-yield index has narrowed by 111 basis points over safer Treasury yields since Wednesday. (Reporting by Kate Duguid Editing by Chizu Nomiyama)