First it was Treasury notes followed by corporate bonds, and now the Federal Reserve is looking to shore up the bond markets further with purchases in municipal debt as well as high yield as part of a concerted effort to provide aid during the coronavirus pandemic.
On Thursday, the Fed said it would pump up to $2.3 trillion into small businesses, mid-sized businesses, local governments, as well as buy high-yield bonds, collateralized loan obligations, and commercial mortgage-backed securities.
“We will continue to use these powers forcefully, pro-actively, and aggressively until we are confident that we are solidly on the road to recovery,” said Fed Chair Jerome Powell.
“Our country’s highest priority must be to address this public health crisis,” Powell said in a statement accompanying details of the new actions. “The Fed’s role is to provide as much relief and stability as we can during this period of constrained economic activity, and our actions today will help ensure that the eventual recovery is as vigorous as possible.”
The markets have been responding positively overall to the government intervention this weeks as the major U.S. indexes have been seeing mostly green this week ahead of Easter.
“The Fed has now done virtually everything we think it should be doing and we think it can do,” said Michael Gapen, chief U.S. economist at Barclays Capital in New York.
With the Federal Reserve stepping in to purchase corporate bonds to help keep the economy afloat, one ETF to consider is 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, 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.
For more market trends, visit ETF Trends.
