Eager to tap North American shale plays from the Eagle Ford in South Texas to North Dakota’s Bakken Shale and a host of others, mid-level and smaller exploration and production companies have become some of the most prolific issuers of U.S. junk bonds in recent years. [Dodging Energy Exposure With Junk Bond ETFs]
Oil and gas issuers account for 13.5% of HYG’s weight, the ETF’s second-largest sector allocation behind a 14.9% weight to consumer services.
Then there is the matter of increased leverage. At the end of the second quarter, U.S. shale producers had a total of $190.2 billion in debt, up from less than $150 billion at the end of 2011, according to Bloomberg data.
iShares iBoxx $ High Yield Corporate Bond ETF
Tom Lydon’s clients own shares of HYG.