"The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) absorbed the volatility, kept paying its monthly distribution, and is now trading near $80, up about 2% over the past month."
"With HYG yielding above 6% and the 10-year at about 4.4%, the implied spread is tight by historical standards. Tight spreads are friendly to NAV but leave little cushion if defaults rise."
"A move from current tight levels back above 500 basis points has historically coincided with HYG drawdowns of 5% or more, while a move tighter on dovish Fed news typically lifts the fund."
High-yield bond investors observed a spike in the VIX but did not experience a credit selloff. The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) maintained its monthly distribution and is trading near $80. HYG offers diversified exposure to around 1,000 sub-investment-grade corporate bonds with a net expense ratio of 0.49%. The fund's yield exceeds the 10-year Treasury yield, although critics note a decline in distribution over time. The high-yield credit spread is crucial for HYG's performance, with tight spreads indicating less cushion against defaults.
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