HYG’s underlying index, the Markit iBoxx USD Liquid High Yield Index, also requires holdings to have at least $400 million in par value, and the debt issuer must have at least $1 billion in total debt outstanding. Due to their similar focus on liquidity, the two high-yield bond ETFs have similar portfolios.
The U.S. economy is expanding, but not too rapidly and employment is rising, suggesting the Fed has room to proceed with several more rate hikes. U.S. unemployment resides at multi-decade lows.
Those data points add “to speculation that the Fed will raise rates sooner than later — making short-duration junk bonds increasingly unattractive as yield-hungry investors can get what they want from investment-grade debt,” according to Bloomberg.
For more information on the fixed-income market, visit our bond ETFs category.