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Bond exchange-traded funds roared higher Tuesday, the first day the Federal Reserve stepped into the market to help keep credit flowing in the aftermath of the coronavirus-induced March market shock.
The iShares iBoxx $ Investment Grade Corporate Bond ETF LQD, +1.17%, the largest and most frequently traded investment-grade bond fund, rose a little more than 1% midday, its biggest move since April 9, when the Fed announced it was expanding its bond-buying program to include below-investment grade debt. Another large bond fund, Vanguard’s Intermediate Term Corporate Bond fund VCIT, +0.66%, rose 0.5%.
LQD has gained just over 10% since March 23, the day the Fed first announced plans to buy ETFs, as investors rushed to get ahead of expected trades, according to FactSet data.
Stocks, meanwhile, were mixed on Tuesday: the Dow Jones Industrial Average DJIA, -0.37% was virtually unchanged, the tech-heavy Nasdaq Composite Index COMP, -0.02% was fractionally higher, and the S&P 500 SPX, -0.48% declined.
See:The Fed is going to buy ETFs. What does it mean?
On Tuesday, the two biggest “junk” bond ETFs were higher: the largest, iShares iBoxx $ High Yield Corporate Bond ETF HYG, +0.53% was up 0.6%, and a smaller competitor, SPDR Bloomberg Barclays High Yield JNK, +0.53%, gained 0.5%.
The central bank also said in April that it will buy “fallen angels,” or junk-rated bonds that only recently slipped below investment-grade. Two such ETFs were also higher Tuesday: the VanEck Vectors Fallen Angel High Yield Bond ANGL, +0.87% gained 0.8%, and the iShares Fallen Angels USD Bond ETF FALN, +0.66% rose 0.7%.
Among investment-grade corporate bond funds, longer-duration exposure was outperforming. The iShares Long-Term Corporate Bond ETF IGLB, +1.51% and the SPDR Portfolio Long Term Corporate Bond ETF SPLB, +1.72% were both 1.2% higher at midday, while their short term counterparts IGSB, +0.33% SPSB, +0.27% were up 0.2%.
Earlier coverage:Fed kicks off its buying of corporate debt ETFs
