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Market Extra: Why the jobs report could give the junk-bond market a second wind

Friday’s jobs report could prove pivotal to a high-yield corporate bond market that’s already retraced lost ground since Monday amid rising expectations for more monetary stimulus.

Corporate debt rated below investment-grade, or so-called junk bonds, have made significant gains this week on surging expectations that the Federal Reserve will cut rates to help give steam to an economy shadowed by the prospects for a global trade war. Against this tense backdrop, the jobs report could energize bets for easier Fed policy and spur a further rally for bonds from leveraged issuers.

The recent strength in high-yield may reflect “expectations for a reflationary Fed and the belief that risky assets should benefit at some point,” said Gary Pzegeo, head of fixed income at CIBC U.S.

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