U.S. corporate bonds perk up after stock selloff By Reuters
CHICAGO (Reuters) – Like the U.S. stock market, the nation’s corporate bond market on Tuesday steadied one day after fear of contagion risk from debt-troubled China property developer Evergrande rattled global financial assets.
Wall Street recovered from Monday’s selloff, and the IFR of Refinitiv shows that corporate debt offerings are returning to market after being largely affected by volatility. ()
The iShares exchange traded fund which tracks high-yield corporate debts, fell 0.35% Monday but was still up around 0.17%.
After falling to the lowest point since July, high-yield bonds spreads rose Monday. This is a sign that there was a general mood of risk taking.
After a Friday decline of 304 basis points, the spread option-adjusted on the ICE U.S. High Yield Index (NYSE:) widened by 323 basis points to reach its highest level since July 19th.
This is the spread, which refers back to investor’s preference to have corporate debt rather than safer Treasury bonds.
On Monday, the spread on ICE BofA U.S. Corporate Index – a reference for investment-grade bonds – increased by a mere basis point to 91 basis marks.
Analysts at BMO Capital Markets said that high-grade spreads performed well in comparison to other risk assets, and that there is still strong demand.
They stated that “Nevertheless, event risk is high in the short-term and spreads do not expect to outperform tomorrow’s Federal Open Market Committee meeting and a concrete solution to the Evergrande problem, even though a reversal yesterday’s move may be possible.”
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