Tag: below investment grade

Junk Has Never Been So Valued

Mary Pat Campbell

Link: https://www.wsj.com/articles/junk-has-never-been-so-valued-11612915150

Excerpt:

The Federal Reserve has pushed down long-term interest rates by buying bonds and committed to keep short-term interest rates at near zero through 2023. While the central bank’s interventions were needed in March, it continued to buy corporate bonds well into the summer when markets didn’t need the support.

Chairman Jerome Powell last month reassured investors that the Fed won’t take away its market support until the economy makes “substantial further progress” toward inflation above 2% and maximum employment. The rush into high-yield corporate and municipal debt has since accelerated with yields dropping due to great demand.

Junk-rated Chicago Public Schools and the city of Detroit recently floated bonds yielding less than 2%. Spreads with the AAA muni-bond benchmark have collapsed. The sages at BlackRock last month recommended high-yield munis for their “diversification benefits” and “high levels of income” and saw “significant value” in Puerto Rican bonds.

Author(s): Editorial board

Publication Date: 9 February 2021

Publication Site: Wall Street Journal

Junk Has Never Been So Valued

Mary Pat Campbell

Link: https://www.wsj.com/articles/junk-has-never-been-so-valued-11612915150

Excerpt:

If you’re an over-leveraged company at risk of default, now’s your moment to load up on more debt. The average yield on U.S. junk bonds dropped below 4% for the first time on Monday amid a market scavenger hunt for higher returns.

The Federal Reserve has pushed down long-term interest rates by buying bonds and committed to keep short-term interest rates at near zero through 2023. While the central bank’s interventions were needed in March, it continued to buy corporate bonds well into the summer when markets didn’t need the support.

Author(s): WSJ Editorial Board

Publication Date: 9 February 2021

Publication Site: Wall Street Journal

Chicago Public Schools’ yield penalties hit fresh low

Mary Pat Campbell

Link: https://fixedincome.fidelity.com/ftgw/fi/FINewsArticle?id=202101291341SM______BNDBUYER_00000177-4f21-d760-a9ff-4ffdc0490002_110.1#new_tab

Excerpt:

Investors on the hunt for yield with few pickings scooped up Chicago Public Schools? junk paper Wednesday driving down the district?s yield penalties paid in the primary market to their lowest in years.

The 10-year in the $560 million sale that marked the Chicago Board of Education?s first COVID-19 era sale settled at a yield of 1.94%, a 117 basis point spread to the Municipal Market Data?s AAA benchmark.

The BBB benchmark was at an 89 basis point spread Thursday. The new-money and refunding bonds carried one investment grade rating and two speculative grade ones and while high yield investors snapped up the paper, Alliance Bernstein?s high impact social fund shunned the transaction. The fund said the district has failed to provide sufficient evidence it?s protecting students from in-school sexual misconduct in the aftermath of a scandal that drew a rebuke from the U.S. Department of Education.

Author: Yvette Shields

Publication Date: 29 January 2021

Publication Site: Fidelity Fixed Income