High-yield corporate bond ETFs acted as expected during the recent equity market stress, providing efficient vehicles for price discovery as some junk-rated debt was pinched alongside stocks.
The iShares iBoxx $ High Yield Corp Bd ETF (NYSEArca: HYG) is the largest high-yield corporate bond ETF in the U.S. HYG tracks the investment results of the Markit iBoxx USD Liquid High Yield Index, which is comprised of high yield U.S. corporate bonds that have less than investment-grade quality. HYS seeks to provide total returns that closely correspond to the ICE BofAML 0-5 Year US High Yield Constrained Index, which is comprised of U.S. dollar denominated below investment grade corporate debt securities publicly issued in the U.S. domestic market with remaining maturities of less than 5 years.
“Yields on bonds rated below investment grade are the highest since November 2016, jumping to 6.61 percent on Wednesday from 6.18 percent on Oct. 1, according to Bloomberg Barclays index data. They’ve already lost more than 1 percent in October, on pace for the worst monthly performance in almost three years,” reports Bloomberg.
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