Exchange traded funds that invest in high-yield or “junk” bonds plunged nearly 2% on Thursday even though the underlying market was relatively quiet, according to reports.
The ETFs’ decline is another worrying sign for stock bulls, since weakness in the high-yield sector can foreshadow tough times for equities.
SPDR Barclays Capital High Yield Bond (NYSEArca: JNK) and iShares iBoxx $ High Yield Corporate Bond Fund (NYSEArca: HYG) both slipped about 2% on Thursday.
Trading volume in the junk ETFs surged on Thursday. [High-Yield ETF Pullback a Worrying Sign for Market?]
Barron’s noted that the high-yield ETFs fell sharply while the market for the underlying market was little changed.
“So, what does it mean that junk-bond ETFs are plunging while actual junk bonds barely budge?” Randall W. Forsyth wrote. “It seems somebody wants to get out and the ETFs offer the easiest exit.”
Representatives from BlackRock and State Street, which manage the two high-yield ETFs, didn’t immediately return a request for comment on Friday morning.
SPDR Barclays Capital High Yield Bond
