Fed creates monster debt problem
The US corporate bond yields, as represented by Bloomberg Barclays Average Corporate Bond Yield Index, have declined to a record low of 2.03% despite debt levels as a percentage of gross domestic product soaring to record highs.
This is because the Federal Reserve is buying individual corporate bonds in addition to exchange-traded funds as part of a $250 billion program funded by the CARES Act.
Usually, an uptick in debt levels pushes bond prices lower and yields higher. However, in this case, the Fed has essentially created a backstop to the debt market, which according to some observes, is a cause for concern.
"The Fed has created its own monster. It can't stop buying assets otherwise the whole system will collapse," tweeted Otavio Costa, portfolio manager at Crescat Capital.
Reprinted from FXStreet，the copyright all reserved by the original author.
Disclaimer: The content above represents only the views of the author or guest. It does not represent any views or positions of FOLLOWME and does not mean that FOLLOWME agrees with its statement or description, nor does it constitute any investment advice. For all actions taken by visitors based on information provided by the FOLLOWME community, the community does not assume any form of liability unless otherwise expressly promised in writing.
FOLLOWME Trading Community Website: https://www.followme.com
Hot
No comment on record. Start new comment.