Additionally, the speculative-grade debt securities are typically expected to outperform other fixed-income assets in periods of rising inflation and interest rates as these junkier bonds capitalize on their greater dependence on corporate fundamentals and stock-esque returns during a strengthening economic environment.
Nevertheless, the current pullback in junk bond ETFs could be due to energy-sector exposure – the sudden decline in crude oil prices makes it harder for companies to pay back their loans. Still, the S&P 500 has been plugging along, despite the energy sector’s underperformance. [Another Benefit of Lower Duration Junk ETFs: Less Energy Exposure]
iShares iBoxx $ High Yield Corporate Bond ETF
For more information on the speculative-grade debt, visit our junk bonds category.
Max Chen contributed to this article. Tom Lydon’s clients own shares of HYG.