For instance, Energy XXI Ltd bonds are trading at 44 cents on the dollar. HYG includes three Energy XXI debt securities that make a little over 0.1% of the ETF’s overall portfolio.
However, as Joseph LaVorgna, chief U.S. economist for Deutsche Bank notes, the energy sector accounts for an “extremely small portion” of total U.S. employment and the impact of low oil prices on industry defaults could be contained. Additional LaVorgna points out that the benefits of cheap gas for large employers as an input cost would help offset any potential losses from smaller oil producers.
Moody’s, on the other hand, expects the most defaults to come out of U.S. consumer services sector.
SPDR Barclays High Yield Bond ETF
For more information on corporate debt, visit our corporate bonds category.
Max Chen contributed to this article.