Entering text into the input field will update the search result below

HYG: Fears Of Economic Pain Still Present

Nexus Research profile picture
Nexus Research


  • The HYG ETF has rallied 6.88% from its 52-week low amid a dovish Fed.
  • The yield curve still remains relatively flat, reflecting weaker economic conditions ahead.
  • Markets are still anticipating a rate cut in 2020, indicating that recession fears have not completely vanished.

The iShares iBoxx High Yield Corporate Bond ETF (NYSEARCA:HYG) is up 6.88% from its 52-week low during the Q4 2018 market turmoil. While the high-yield space had a dismal year in 2018 amid fears that an overly hawkish Fed could end up inducing a recession, speculative-grade bonds have actually been rallying this year due to more dovish and accommodative guidance provided by the central bankers, which has eased market tensions lately. Though there are signs that a dovish Fed may not be able to inhibit economic conditions from worsening, in which case, the rally in the HYG ETF could prove short-lived.

Source: Yahoo Finance

Prospectus Review:

The HYG ETF tracks the Markit iBoxx USD High Yield Liquid Index as its underlying benchmark. The fund management uses a sampling indexing strategy, whereby they select certain high-yield corporate bonds that are representative of the underlying index and at least 90% of its portfolio is allocated towards these bonds.

The top 10 holdings of the fund include:

Source: ishares

Risk note from the prospectus:

Debt issuers and other counterparties may be unable or unwilling to make timely interest and/or principal payments when due or otherwise honor their obligations. Changes in an issuer's credit rating or the market's perception of an issuer's creditworthiness may also adversely affect the value of the Fund's investment in that issuer. The degree of credit risk depends on an issuer's or counterparty's financial condition and on the terms of an obligation.

The reason I have chosen this particular ETF is because, out of all the ETFs that offer exposure to the high-yield corporate bond sector, this fund has the highest assets under management (AUM) according to ETFdb.com, currently standing at $14.5 billion. I consider AUM as a good indicator for how successful the fund has been in implementing its

This article was written by

Nexus Research profile picture
Striving to uncover long-term investment opportunities (10+ years) through in-depth research and analysis. Nexus Research seeks to evaluate and compare business strategies to determine a company’s potential for market penetration, revenue growth and profit margin expansion. During market downturns, stocks often become cheap very fast, creating various investment opportunities at once. Amid such circumstances, investors often lack the time to research a company thoroughly before making investment decisions, out of fear that they will miss out on attractive entry points. Therefore, Nexus Research not only uncovers present-day buying opportunities, but also offers extensive insights on solid companies with promising growth potential despite expensive valuations, thereby allowing investors to be ready and make well-informed investment decisions when the stock becomes more reasonably valued.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.