It was full steam ahead for the Federal Reserve when it came to shoring up the bond market following the Coronavirus sell-offs in March as the central bank was quick to purchase bond-focused ETFs and then individual corporate bonds. Now, the Fed may be pumping the brakes on the shopping spree.
Per a MarketWatch report, a “senior official at the New York Federal Reserve said the U.S. central bank could slow its pace of corporate debt purchases if financial markets continued to improve. Daleep Singh, head of the New York Fed’s markets group, noted the functioning of corporate credit markets had strengthened since the Fed unrolled its emergency lending backstops. Still, Singh said the central bank stood ready to tweak its approach given the uncertainty around a potential wave of bankruptcies from the economic impact of the coronavirus.”
In order to shore up the debt market, the Fed dumped $8.7 billion into exchange-traded funds (ETFs) and bond purchases.
“The vast majority of the money has been invested in exchange-traded funds rather than through direct bond purchases. The amounts are also tiny, compared with the nearly $10 trillion of outstanding corporate debt,” a Barron’s article noted.
Getting Corporate Bond Exposure
Investors looking to get in on the corporate bond action, they can consider the Goldman Sachs Access Investment Grade Corporate Bond ETF (GIGB ). GIGB seeks to provide investment results that closely correspond to the performance of the FTSE Goldman Sachs Investment Grade Corporate Bond Index.
The fund seeks to achieve its investment objective by investing at least 80% of its assets (exclusive of collateral held from securities lending) in securities included in its underlying index. The index is a rules-based index that is designed to measure the performance of investment-grade, corporate bonds denominated in U.S. dollars that meet certain liquidity and fundamental screening criteria.
For a high yield option to squeeze out that extra yield albeit more risk, take a look at the Goldman Sachs Access High Yield Corporate Bond ETF (GHYB ). GHYB seeks to provide investment results that closely correspond, before fees and expenses, to the performance of the FTSE Goldman Sachs High Yield Corporate Bond Index.
The fund seeks to achieve its investment objective by investing at least 80% of its assets (exclusive of collateral held from securities lending) in securities included in its underlying index. The index is a rules-based index that is designed to measure the performance of high yield corporate bonds denominated in U.S. dollars that meet certain liquidity and fundamental screening criteria.
