However, some market observers attributed the resilience in junk bonds to the rebound in oil prices, which helped support energy bonds that plunged in late 2014 in response to the falling crude oil prices.
Junk bonds also tend to have shorter maturities and a much higher yield over benchmarks than higher-rated bonds, which can help cushion investors from the negative effects of rising rates and higher inflation. For instance, JNK has a 4.38 year duration and a 5.61% 30-day SEC yield, and HYG shows a 4.13 year duration and a 5.14% 30-day SEC yield. [Hedged Bond ETFs to Diminish Rate Risk]
High-yield debt has “shown a degree of resiliency here to the shift in the inflation outlook,” Jeffrey Rosenberg, a managing director at BlackRock Inc., told Bloomberg. “That resilience could be challenged if we follow up this bout of higher rates with a shift in” expectations for when the Federal Reserve will lift rates.
iShares iBoxx $ High Yield Corporate Bond ETF
For more information on speculative-grade debt, visit our junk bonds category.
Max Chen contributed to this article.