Corporate Debt Stages Global Rally After ECB Expands Stimulus

Corporate bond risk in the U.S. and Europe dropped to the lowest in at least two months after the European Central Bank cut all its interest rates, expanded monthly bond purchases and said it would buy corporate bonds.

Markit iTraxx Crossover Index of credit-default swaps on 75 companies with high-yield ratings fell 41 basis points to 335 at 8:45 a.m. in New York, the lowest since Jan. 6, according to data compiled by Bloomberg.

Markit iTraxx Europe Index of contracts on 125 investment-grade companies dropped 11 basis points to 80, the lowest since Jan. 6. Markit CDX North American IG Index fell to 90 basis points, the lowest since Dec. 31.

The ECB will buy investment grade euro-denominated bonds issued by non-bank corporations established in the euro area, according to a press release on Thursday. Corporate bonds are the latest assets to be added to a growing list of securities, from government debt to mortgage-backed notes, the central bank is snapping up to combat weak growth and inflation.

The 25-member Governing Council cut the rate on cash parked overnight by banks by 10 basis points to minus 0.4 percent, and its benchmark rate to zero. Bond purchases were raised by a third to 80 billion euros ($87 billion) a month, starting in April. A new series of long-term loans to banks will be launched. 

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