High-yield, speculative-grade bond exchange traded funds have been steadily gaining momentum, even outpacing the equities market.
Over the past three months, the iShares iBoxx $ High Yield Corporate Bond ETF (NYSEArca: HYG) rose 3.3% and the SPDR Barclays High Yield Bond ETF (NYSEArca: JNK) gained 3.4%, whereas the S&P 500 Index dipped 0.4%.
Some market observers see the divergence between junk bonds and stocks as either foreshadowing a bump higher for the S&P 500 or a snap back in high-yield debt, reports Chris Dieterich for the Wall Street Journal.
Junk bonds have usually mirrored the stock market trends. In recent years, junk bond slips were usually followed by stock market declines while both junk bonds and stocks rebounded together in February and both moved in unison after the June’s Brexit vote.
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Consequently, some argue that the recent strength in junk bonds is a good sign.