The Fed has started to purchase corporate bonds through a secondary market corporate facility. A bit of a mouthful right? but all this really means is that the Fed is lending corporates money which they have to pay back over a fixed period of time. This is important because when the Fed buys a specific bond it is an indication to other investors that if the fed is willing to invest in that company then its a relatively safe investment. The knock-on effect in markets is that the credit curve will steepen (we will cover in more detail in tomorrow’s post!) and investors will start to look at the US credit market for returns firstly and as conditions improve also the Emerging Markets.
Good time to invest in Emerging Market corporate bond before the masses or worst mistake? Discuss..