The New York Stock Exchange on Monday, September 16, 2024. Photographer: Yuki Iwamura/Bloomberg.
The Federal Reserve's looming rate cuts are fueling a rally in the riskiest corner of the U.S. corporate bond market, but some investors are concerned the party may not last.
The Fed is expected to cut interest rates today, for the first time in four years. Signs that the U.S. economy is slowing and inflation cooling have prompted some bond traders to call for up to a half-point interest rate cut. As risk markets have broadly rallied, junk bonds have gained 7.4 percent this year and have outperformed Treasuries in recent weeks, with spreads narrowing 69 basis points (bps), or 0.69 percentage point, since August 5.
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