SEC Liquidity Rules Gave Junk Borrowers Cheaper Debt Costs

July 30, 2021, 2:41 PM

A 2017 U.S. rule change for mutual funds may have cut average borrowing costs for high-yield companies by more than a percentage point, according to an analysis by Barclays Plc.

The rule in question was from the U.S. Securities and Exchange Commission, and was designed to ensure mutual funds could sell enough assets to pay back investors who want to cash out when markets drop. Under the regulations, funds have to keep a certain percentage of their assets in liquid investments that could be sold in short order.

These rules resulted in junk-bond mutual fund managers buying more high-yield exchange-traded ...

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