"Bonds rated BBB or higher are considered investment grade. Anything below that falls into what's known as high-yield, non-investment grade, or 'junk' bonds. These are issued by companies with weaker balance sheets, higher leverage, or more uncertain business outlooks."
"According to S&P Global, BB-rated bonds, the highest tier of junk, carry a three-year cumulative default rate of 4.17%, compared to just 0.91% for BBB-rated bonds. Move down to B-rated bonds and that jumps to 12.41%. At the CCC level, where companies are at real risk of default, the three-year cumulative default rate spikes to 45.7%."
"XCCC is a passive ETF that tracks the ICE CCC US Cash Pay High Yield Constrained Index. It holds a diversified basket of corporate bonds rated CCC1 through CCC3, based on an average of ratings from Moody's, S&P Global, and Fitch."
"To manage concentration risk, the index caps exposure to any single issuer at 2%, so no one company can dominate the portfolio. Sector exposure is fairly broad."
Bonds rated BBB or higher are investment grade, while those below are high-yield or junk bonds. Junk bonds have higher default rates, with BB-rated bonds at 4.17% and CCC-rated bonds at 45.7%. Investors seeking high income may find these bonds appealing despite the risks. The BondBloxx CCC Rated USD High Yield Corporate Bond ETF (XCCC) tracks risky CCC-rated bonds and manages concentration risk by capping exposure to any single issuer at 2%. The ETF offers a diversified portfolio across various sectors.
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