For instance, HYG has declined 4.0% over the past month while JNK fell 5.0%. HYG allocates about 14% of its weight to oil and gas issuers. Approximately 120 of the high-yield bonds held by JNK are issued by companies engaged in the exploration, production or transportation of coal, natural gas or oil. Energy bonds make up 14% of the U.S. high-yield bond market. [There Will be Blood: Warnings for Junk ETFs With Energy Exposure]
The sell-off in energy-related junk bonds is also dragging down nonenergy high-yield debt as investors dumped everything they could to raise cash. Consequently, Goldman Sachs Group believes that speculative-grade market could experience further downside and lingering volatility.
U.S. high-yield corporate bond yields are now trading at 5.02 percentage points above comparable Treasuries, the widest spread since June 2013. HYG has a 4.27 year duration and a 5.36% 30-day SEC yield, and JNK has a 4.49 year duration and a 5.92% 30-day SEC yield.
For more information on the speculative-grade debt market, visit our junk bonds category.
Max Chen contributed to this article.
Full disclosure: Tom Lydon’s clients own shares of HYG and JNK.