Rate Cut Giving Boost to Junk Bonds

Although junk bonds have been falling in value along with asset-backed securities tied to subprime loans, the 50-basis-point cut in the Federal Reserve interest rate to 4.75% has resulted in widening spreads between Treasuries and junk bonds that is driving appeal for the latter, Dow Jones reports.

The day after the Fed cut the rates, R.R. Donnelley issued $1 billion in junk bonds, and according to industry reports, investment banks will be bringing more junk bonds to market before the end of the year.