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Anonymous

04 Aug 2020

∙

How does the FED buying junk and corporate bonds via ETFs prevent bonds from defaulting? does it inflate prices of bonds without actually reducing the risk of defaults?

Would someone with economic background help me please!

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Cedric Jamie Soh

20 Apr 2020

Director at Seniorcare.com.sg

By buying bonds, the Feds help to create extra demands for bonds which might have collapse if there is reducing demand and increasing supplies (when companies and bond funds need to sell tons of bonds to have cash for their other needs).

Yes, inflating prices of bonds help to reduce risks of default, it reduce the leverage amount, it reduce the supply of bonds.

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