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Junk-bond trading volumes are rebounding to the highest level in 11 months as optimism the U.S. economy can weather Europe's debt crisis kindles investor appetites for riskier assets.
The average daily volume of publicly traded speculative- grade bonds rose to $4.92 billion this month, a 74 percent increase from December and the most since February, according to the Financial Industry Regulatory Authority's bond-pricing system. Sales of new junk bonds are accelerating at the fastest pace since September, and exchange-traded funds focused on the debt are growing at the fastest two-month pace since 2009.
Trading in the $1 trillion market is picking up as the Federal Reserve said it will keep its benchmark interest rate low until at least late 2014. The highest U.S. consumer confidence since May and a decline in Italian and Spanish bond yields are luring back investors who fled the market last year, even as European leaders struggle to prevent a Greek default and as dealers hold inventories at about the lowest since 2003.
"We're in a positive spot with the fact that economic data seemed to come out positively and there hasn't been too much negative coming out of Europe," said Jody Lurie, a corporate credit analyst at Janney Montgomery Scott in Philadelphia. "Both investors and issuers are entering this market during the eye of the storm before anything gets worse."
Income Security Recommendation February 2012 Issue.
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