High Yield Outperforms EM Debt, Single Bs Outperform Triple Cs | ETF Trends

Risk-off behavior in the credit markets last week had both triple-C- and double-B-rated bonds each reporting a -0.95% return for the week ending April 25. Single-B-rated bonds returned -0.81%, reports BondBloxx Investment Management co-founder and CIO Elya Schwartzman in his weekly update on the U.S. credit markets.

Meanwhile, single-B-rated bonds outperformed both BB and CCC buckets by 60 to 70 basis points for the month. Schwartzman cites Ice Data Services as the source for the data. Returns were as of April 25.

Among high yield sectors, technology, media, and telecommunications posted the lowest return at -1.1%, while core industrials posted a relatively benign -0.7% return for the week. For the recent month, Core Industrials (-1.7%) led healthcare (-2.5%) by more than 80 bps.

Among broader credit markets, Schwartzman notes that investment-grade fixed income had a reprieve last week as rates stabilized, returning -0.5% on widening corporate bond spreads.

Both high yield and investment-grade fixed income outperformed emerging markets debt for the recent week, which returned -1.5% on spread widening.

Returns as of April 25, 2022
Source: Ice Data Services; JP Morgan

In February, BondBloxx launched seven U.S. high-yield bond ETFs that offer precise, index-based exposure to the high-yield asset class and allow investors the opportunity to diversify and manage risk to the industry sector. The funds are passively managed and track rules-based sub-indexes of the ICE BofA US Cash Pay High Yield Constrained Index.

BondBloxx was founded by ETF industry leaders Leland Clemons, Joanna Gallegos, Elya Schwartzman, Mark Miller, Brian O’Donnell, and Tony Kelly. The team has collectively built and launched over 350 ETFs at firms including BlackRock, JPMorgan, State Street, Northern Trust, and HSBC.

According to the issuer, more institutional investors are acknowledging the role that fixed income ETFs can play in their portfolios, even during times of volatility. They can offer short-term liquidity while offering a more efficient way to keep portfolios in balance. Sector ETFs enable intentional tactical tilts to be added to their portfolios. They can also enhance price discovery, even when transparency is low, or the underlying securities are not trading.

“One of our goals at BondBloxx is to provide market awareness of the variation of returns within the credit markets,” says Schwartzman. “An important yet unappreciated source of outperformance for investors is the dispersion of returns within the broader bond market categories, especially during times of market dislocation.”

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