Three numbers to start your day:
In 2020, the Federal Reserve’s Portfolio of Corporate Bonds and ETFs Rose to $14 Billion
That is according to its latest presentation to Congress. That is up from $13.6 billion at the end of November. While the Fed has stopped buying ETFs, it has kept buying individual company bonds on the secondary market, with a total face value of $5.2 billion.
The Fed has been buying bonds of companies that are rated investment grade, as well as bonds of companies that were rated investment grade before the pandemic. About 41% of the bonds are rated A or higher, while just over half are rated BBB. About 13% of the corporate bond ETFs by market value are classified as high yield.
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The chief executive and founder of DoubleLine suggested looking at a beaten-up and unloved sector of credit markets: bank loans. Alex Flynn/Bloomberg
Risks lurk in an overvalued stock market and the bond market with inflation on the horizon, DoubleLine chief executive and founder Jeffrey Gundlach said. But the fund manager dubbed by
Barron’s as the Bond King nearly a decade ago does have one pick for income investors.
In an interview with CNBC, Gundlach suggested looking at a beaten-up and unloved sector of credit markets: bank loans, which ended 2020 with price losses in many cases as fund investors fled the sector. By contrast, fund investors rushed into other parts of the credit market, especially junk bonds, in their quest to grab what little income was available after the Federal Reserve slashed short-term interest rates to zero and provided unprecedented support to the corporate bond market.