FILE PHOTO: George Washington is seen with printed medical mask on the one Dollar banknotes in this illustration taken, March 31, 2020. REUTERS/Dado Ruvic/Illustration/File Photo
To prevent markets from seizing up if a slew of such ratings downgrades hits simultaneously, pushing billions of dollars of corporate debt to sub-investment grade, the Federal Reserve said last month it would take the revolutionary step of buying junk bonds, so long as they had been deemed investment grade on March 22.
Although some investment-grade fund managers have ventured into junk bonds since the 2008-9 financial crisis, the latest move may well turbo-charge the departure from ratings-defined investment processes, especially the cliff-edge division between high-yield and high-grade debt. Reflecting the interest in investing across the ratings spectrum, fund rating firm Morningstar says it now tracks 206 European credit funds that can hold investment-grade as well as high-yield , versus 180 five years ago.“These are restrictions we asked to be slightly softened, to allow us hold the bonds a bit longer,” he said.
Indexes reserved for top-grade bonds and the passive funds that track them have little leeway and investors such as insurers face strict regulatory constraints on holding lower-rated securities. That means investors, especially in closely regulated sectors, are unlikely to discount credit scores altogether.
Very dangerouse.... very...
Yeah ... I'm not gonna do that