Fed’s Twist a Plus for Corporates

Central bank’s purchase of longer debt helps borrowers like McDonald's and P&G pay lower rates.

Federal Reserve Chairman Ben S. Bernanke’s Operation Twist is paying dividends in the corporate bond market.

The central bank’s program to extend the average maturity of debt in its portfolio by selling short-term bonds and buying longer-term ones is helping borrowers from McDonald’s Corp. to Procter & Gamble Co. cut interest rates to record lows. Since August, the difference in yields between notes due in one to three years and bonds that mature in 15 years or more has shrunk by 0.7 percentage point to 3.3 percentage points.

Leveraged Loans

Prices on leveraged loans rose for a seventh straight week, reaching the highest since August. The Standard & Poor’s/LSTA U.S. Leveraged Loan 100 index added 0.34 cent to 93.4 cents on the dollar. The measure, which tracks the 100 largest dollar- denominated first-lien leveraged loans, has climbed from 90.29 on Nov. 29.

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