Sept. 21 (Bloomberg) -- Confidence in U.S. high-yield, high-risk debt held at about the highest level in a week as investors bet the Federal Reserve will give more stimulus to the economy.
Markit’s CDX North America High Yield Index, a credit- default swaps index which rises as investor confidence improves, was unchanged at 93.75 percent of face value as of 8:37 a.m. in New York. The benchmark has climbed from 91 on Sept. 12, the lowest level in two years.
The Federal Open Market Committee meeting today will decide to replace short-term Treasuries in its $1.65 trillion portfolio with long-term bonds, according to 71 percent of 42 surveyed economists. The move is known as “Operation Twist” for its goal to bend the yield curve, forcing longer-term borrowing costs lower to support the housing market and consumers.
Credit swaps pay the buyer face value if a borrower fails to meets its obligations, less the value of the defaulted debt.
High-yield bonds are rated below Baa3 by Moody’s Investors Service and lower than BBB- by Standard & Poor’s.
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