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Riskier Fixed-Income Sectors Bounce Back in the Second Quarter

Decisive central bank action and investor optimism for a swift economic recovery spurred a titanic rally for riskier sectors in fixed-income markets.

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Editor’s note: Read the latest on how the coronavirus is rattling the markets and what investors can do to navigate it.

Following one of the most rapid and severe market drawdowns in history, fixed-income markets roared back to life in an inversely swift recovery over the second quarter of 2020. The Federal Reserve maintained the momentum of its thorough, “kitchen sink” response to the coronavirus-related crisis. After bringing the federal-funds rate toward the zero range at the end of the first quarter, the Federal Open Markets Committee provided forward guidance throughout the second quarter, committing to indefinitely low rates. Though the FOMC ruled out negative rates, the Fed expanded its securities-purchasing regime to include high-yield corporate bonds and provided monetary assistance to both institutional and “Main Street” borrowers through a broad basket of lending facilities and related programs.

Gabriel Denis does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.