Since the start of 2014, HYG and JNK have outperformed SPY, though that is more by virtue of SPY’s decline than overt ebullience in the high-yield bond market. With Tuesday’s gain, SPY is still off about 3% this month while HYG and JNK have posted modest gains.
Diminished expectations regarding defaults could buoy HYG, JNK and rival ETFs going forward.
“The Markit CDX North American Investment Grade Index, a credit-default swaps benchmark used to hedge against losses or to speculate on creditworthiness, decreased 2.1 basis points to 70.5 basis points at 1:56 p.m. in New York, according to prices compiled by Bloomberg. The measure fell by as much as 2.6 basis points today, the biggest plunge since Dec. 18,” reports Jessica Summers for Bloomberg.
In terms of technicals, Kimble says “The key to the patterns above is for rising support to hold and resistance to break. Should support give way, junks performance just becomes junkier! Touch the Junk? If a breakout happens, it would be a positive!”
ETF Trends editorial team contributed to this post. Tom Lydon’s clients own shares of HYG, JNK and SPY.