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Junk bond prices continue rise after best day since 2009

By Kate Duguid

By Kate Duguid

NEW YORK, March 26 (Reuters) - Prices on U.S. high-yield exchange-traded funds rose on Thursday, continuing a move higher this week which saw the ICE/BofA high-yield bond index post its best return since 2009 on Wednesday.

The market for the riskiest U.S. debt - so-called "junk" bonds - has rallied since Tuesday on hopes that $2 trillion stimulus bill passed by the U.S. Senate, which includes a $500 billion fund to help hard-hit industries, will support less-financially stable companies. The Federal Reserve's enormous bond-buying operations announced in the last two weeks apply only to investment grade and not high-yield debt.

The ICE/BofA U.S. high-yield corporate bond index recorded a total return of 1.75% on Wednesday, its best performance since 2009.

Two major high-yield exchange-traded funds - which reflect broad investor sentiment about the junk-bond market - rose on Thursday. The iShares iBoxx High Yield Corporate Bond Fund was up 3.77% in mid-afternoon trade, and the SPDR Bloomberg Barclays High Yield Bond ETF was up 3.54%.

The spreads of Markit's high yield and investment grade credit default swap indexes over safer benchmarks are widely used as a barometer of sentiment in the two respective corporate bond markets.

The spread on the Markit high-yield credit default swap index, another proxy for the performance of the junk bond market broadly, dropped as low as 580 basis points, indicating positive investor sentiment. Thursday's spread was the narrowest in two weeks. (Reporting by Kate Duguid Editing by Marguerita Choy)