Most of the weakness in the speculative-grade market has been focused on commodity-related issuers, notably energy, metals and mining companies. The sub-sectors also make up a good chunk of the junk bond-related ETFs. For instance, HYG includes 12.7% energy and 7.3% capital goods exposure.
“The flight from energy and the reluctance to step back in even at today’s highly distressed levels among investors has been stark,” Michael Contopoulos, a strategist with BofA Merrill Lynch, told the Financial Times. “Even the erstwhile ‘safer’ places to hide may not make the cut going forward.”
iShares iBoxx $ High Yield Corporate Bond ETF
For more information on the speculative-grade debt market, visit our junk bonds category.
Full disclosure: Tom Lydon’s clients own shares of HYG and JNK.
Max Chen contributed to this article.