HY bonds skyrocket as Fed extends its bond buying program

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In an intra-day note to investors, Gorilla Trades strategist Ken Berman, while comenting on the Fed’s plan to extend its bond buying program, said:

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Q1 2020 hedge fund letters, conferences and more

Fed's Bond Buying Program To Cover Junk Bonds

The major indices are all in the green with small-caps leading the way high for the second day in a row. The Fed announced the details of its comprehensive $2.3 trillion lending program to assist the post-COVID recovery this morning, with a stronger focus on the hardest hit small- and mid-sized businesses. The Russell 2000 surged higher thanks to the announcements and high-yield corporate bonds also skyrocketed as the Fed also unveiled its plan to extend its bond buying program to cover certain lower-rated 'junk' bonds.

In economic news, the weekly number of new jobless claims was much high-than-expected for the third week in a row, coming in at 6.6 million and last week’s figure was also revised higher and the three-week total is close to 17 million. The Michigan consumer sentiment number also missed the already bearish expectations, coming in at 71, its lowest reading since late-2011. The Producer Price Index (PPI) and the core PPI were both higher-than-expected, and Italian industrial production also declined by a bit less than the consensus estimate, giving bulls hope that the manufacturing sector could hold up amid the COVID crisis.

Market Wrap

Market breadth has been strong this morning thanks to the broad rally among, with advancing issues outnumbering decliners by a more than 9-to-1 ratio on the NYSE. Only 2 stocks hit new 52-week lows on the NYSE and the Nasdaq, while 13 stocks hit new 52-week highs. The S&P 500 and the Dow have been trading above their VWAPs (Volume-Weighted Average Price) for most of the morning session, but the Nasdaq has been stuck below its VWAP pointing to a mixed and choppy afternoon session. Tech stocks have been relatively weak yet again this morning, while financials, industrials, and energy-related issues shined, together with the lockdown-sensitive utilities. Stay tuned!

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