The tighter spread between junk and high-quality Treasuries reflects the confidence in credit quality of the bonds, which is often put into question during periods of economic stress as witnessed in the recent bout of volatility.
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As yields on safer Treasury bonds rise, investors have shifted out of riskier speculative-grade debt and into the relative more attractive safer plays.
Year-to-date, investors have pulled $1.81 billion from HYG. Over 85% of the ETF’s holdings are rated BB or B, but HYG does devote 10% of its portfolio to highly speculative CCC-rated bonds. The fund has a 30-day SEC yield of 5.84% and charges 0.49% per year.
For more information on the fixed-income market, visit our bond ETFs category.