US junk bonds shrug off the Fed's threat to wind down quantitative easing

Non-investment grade bonds have defied interest-rate worries to deliver strong returns.

"No doubt about it junk bonds have been among the winners in this year's credit-market sell-off," says Brendan Conway in Barron's. "They've shrugged off interest-rate worries in ways that corporate bonds and Treasurys have not."

Investor appetite for these bonds issued by companies with weaker credit ratings has rebounded strongly after a initial wobble when the Federal Reserve announced that it planned to taper its quantitative easing (QE) programme. The major US-listed exchange-traded funds that track junk bond indices saw outflows of $2.2bn in June, but this was rapidly reversed by inflows of $2.6bn in July, says Marketwatch.com.

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