After spreads on high yield bonds jumped to 7.64% on Sept. 12, funds that hold debt ranked below Baa3 or less than BBB- experienced inflows of $210 million last week after losing $6.4 billion in August, according to JP Morgan research.
JP Morgan analysts project defaults could peak at 6% in a U.S. recession. Relative yields on high-yield bonds indicate default rates of 7.4%, or six times the 1.2% current rate, the analysts added. Moody’s data shows that U.S. corporate default rates dropped to 2.1% in August from 2.3% in July.
High-yield ETFs include:
- iShares iBoxx High Yield Corporate Bond Fund (NYSEArca: HYG). HYG has a 12-month yield of 8.06%.
- SPDR High Yield Bond ETF (NYSEArca: JNK). JNK has a 12-month yield of 8.28%.
For more information on junk bonds, visit our junk bonds category.
Max Chen contributed to this article.