The Bond Dream Room

Discussion of the Bond portion of the Permanent Portfolio

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pmward
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Re: The Bond Dream Room

Post by pmward » Sun May 10, 2020 8:32 am

Vil wrote:
Sun May 10, 2020 8:19 am
pmward wrote:
Wed May 06, 2020 3:45 pm
There are multiple factors that go into the price of bonds
As I haven't received the notification email from Fed (they promised me, but anyway... :D ) and as certainly you have more information than me - what's going on with their plans to buy corporate bonds ? Is that only a word (even though widely spread) or any real actions taken ? Can see that HYG and HYLB has quite an increase of AUMs in the last week - 6.84% and 8.41% respectively.. how do you see things going with high yield bonds ?
If what the stock market is telling us is true, and they provided enough stimulus to pull though this deep recession quickly, then I see no reason why high yield won't do well going forward (at least until the inevitable day we do finally get a real corporate debt deleveraging), especially with the backstop from the Fed. I have not looked at the exact purchase numbers from the Fed, I was listening to a podcast though where someone that works as a high yield market maker said the day the Fed announced they were buying high yield their phone was off the hook with institutions wanting to buy high yield as well. The Fed might not have to buy as much as we think, as just them announcing they are buying attracts money as institutions like to bet with the Fed.

This is also unprecedented here in the U.S. so who knows how it will play out in the end? Might be worthwhile seeing how they performed in Japan after the central bank started purchasing. We really are following the Japanese blueprint... and their yields are still low and bonds have still performed well for years. Why do we expect to be any different?
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