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Fallen Angels Get Fed’s Helping Hand. Is That Enough?
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Fallen Angels Get Fed’s Helping Hand. Is That Enough?

Some bonds may be beyond hope, and once the central bank’s backstop ends, there goes the artificial price support.

Larry Light
Chief Investment Officer, 2020
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8

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In its response to the economic turmoil caused by COVID-19, the US Federal Reserve has once again come to the rescue of financial markets. But this time, unlike in past crises, the Fed has added support for high-risk corporate debt. In this informative commentary written before the extension to year-end 2020 of the Fed’s program, financial journalist Larry Light surveys the Fed’s plan to buoy high-yield securities and its potential to aid market recovery. Investors and executives will appreciate his valuable insights in this astute report.

Take-Aways

  • The US Federal Reserve is aiding the high-yield corporate debt market to mitigate the financial and economic consequences of COVID-19.
  • Credit spreads have tightened, a positive sign that the Fed’s actions are working as intended.
  • A scheduled expiration of the corporate bond purchase program could introduce volatility in the high-yield market.

About the Author

Larry Light is a financial journalist at CIO Magazine.

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