Coronavirus Sorts Bond Market Into Winners and Losers
The Fed’s efforts have restored calm in some areas, but risky credit remains vulnerable.
Traditionally safe debt is showing signs of returning to normal.
Photographer: Spencer Platt/Getty Images
For the past month, bond traders confronted nothing short of chaos at every turn. U.S. Treasuries, mortgage-backed securities, investment-grade and high-yield corporate bonds, leveraged loans and collateralized loan obligations, it didn’t matter. Everything was for sale, and no one was willing — or, in many cases, able — to buy.
That relentless tide is starting to turn as March draws to a close. Thanks to a series of bold steps by the Federal Reserve, namely its promise to buy as many Treasuries and agency mortgage-backed securities as necessary, its unprecedented venture into the investment-grade credit market and its deeper expansion into municipal bonds, traditionally safe debt is showing signs of returning to more normal yields and spreads. Blue-chip companies feel comfortable borrowing again.