HYG - HYG: Mind The Gap Between Defaults And Credit Spreads

2024-03-20 16:51:48 ET

Summary

• The iShares iBoxx $ High Yield Corporate Bond ETF has delivered strong returns in 2023 despite concerns about rising corporate defaults.
• HYG's strong performance was driven by tightening credit spreads, which are trading near all-time lows.
• However, all-time low credit spreads do not reflect reality, as actual defaults continue to increase. This signals potential risks for the HYG ETF.

Back in the fall of 2022, I wrote a cautious article on the iShares iBoxx $ High Yield Corporate Bond ETF ( HYG ), warning that slowing economic growth will likely lead to rising corporate defaults and more pain for credit investors....

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