• Quick action by the Federal Reserve helped spark equity and fixed income markets’ robust rebound in late March as the Fed brought rates back to the zero lower bound, initiated unlimited quantitative easing and employed a host of other liquidity measures to help stabilize markets.
  • As the market rally carried into Q2 through early June, U.S. investment grade corporate bonds rose as much 8.0% while high yield bonds returned approximately 12.5%. Both asset classes retraced some of their gains through the balance of June.    
  • The Fed once again helped kickstart a rally this week (in conjunction with a strong bounce in retail sales data), announcing it will begin buying individual corporate bonds in addition to the bond ETF purchases previously implemented under its Secondary Market Corporate Credit Facility.
  • Major fixed income markets reacted quickly to the news, with yields on the Barclays Agg and the 10-year U.S. Treasury plunging approximately -8% and -16%, respectively, lower than where they began June.2 (A bond’s yield and price move in opposite directions.)
  • While investors can certainly cheer the market’s strong rebound since late March, income-oriented investors now find themselves almost exactly where they were prior to the pandemic – in a low- to no-yield world.

1 Investment grade is represented by the ICE BofAML U.S. Corporate Index. High yield is represented by the ICE BofAML High Yield Master II Index.
2 Bloomberg Finance, L.P., as of June 16, 2020.

This information is educational in nature and does not constitute a financial promotion, investment advice or an inducement or incitement to participate in any product, offering or investment. FS Investments is not adopting, making a recommendation for or endorsing any investment strategy or particular security. All opinions are subject to change without notice, and you should always obtain current information and perform due diligence before participating in any investment. FS Investments does not provide legal or tax advice, and the information herein should not be considered legal or tax advice. Tax laws and regulations are complex and subject to change, which can materially impact any investment result. FS Investments cannot guarantee that the information herein is accurate, complete, or timely. FS Investments makes no warranties with regard to such information or results obtained by its use, and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information. FS Investments cannot be held responsible for any direct or incidental loss incurred as a result of any investor’s or other persons reliance on the opinions expressed herein. Investors should consult their tax and financial advisors for additional information concerning their specific situation.

Any projections, forecasts and estimates contained herein are based upon certain assumptions that the author considers reasonable. Projections are speculative in nature, and it can be expected that some or all of the assumptions underlying the projections will not materialize or will vary significantly from actual results. The inclusion of projections herein should not be regarded as a representation or guarantee regarding the reliability, accuracy or completeness of the information contained herein, and neither FS Investments nor the author are under any obligation to update or keep current such information.

All investing is subject to risk, including the possible loss of the money you invest.