Investors Rush Into Junk Corporate Bonds As Fed Rate Cut Speculation Goes Wild: High-Yield Credit ETF Sees Record Monthly Inflows
Portfolio Pulse from Piero Cingari
Investors are pouring capital into junk corporate bonds, betting on Federal Reserve rate cuts. The iShares Broad USD High Yield Corporate Bond ETF (USHY) has seen record inflows, but stretched valuations pose risks if rate cuts don't materialize.
July 29, 2024 | 8:40 pm
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The iShares Broad USD High Yield Corporate Bond ETF (USHY) has experienced record inflows of $2.65 billion this month, driven by investor speculation on Federal Reserve rate cuts. However, the stretched valuations of high-yield bonds pose risks if the anticipated rate cuts do not occur.
The significant inflows into USHY indicate strong investor confidence in upcoming Fed rate cuts, which would benefit high-yield bonds. However, the stretched valuations suggest potential downside risk if the rate cuts do not happen as expected.
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