In the News | May 8, 2020 |
In addition to taking a vast human toll, the coronavirus pandemic has mercilessly infected virtually every corner of the investment world. As markets plunged and seized up, the Federal Reserve dropped its short-term interest rate to zero and began injecting trillions of dollars into the financial system to shore up credit markets and keep money flowing to beleaguered companies, households and local governments. Yields on 10- and 30-year Treasuries plummeted to record lows, and yields briefly turned negative on some short-term T-bills.
Within weeks, yield credit spreads soared to 10 percentage points. Terri Spath, chief investment officer of Sierra Investment Management, notes that in the past, when credit spreads blew out to such levels, it heralded an attractive entry point in the high-yield bond market, implying strong future returns for brave investors. Spreads have since narrowed to between seven and eight points, but some good deals remain.