iShares iBoxx $ High Yield Corporate Bond ETF
Loading news...
Dearborn Partners LLC acquired a new position in shares of iShares iBoxx $ High Yield Corporate Bond ETF (NYSEARCA:HYG) in the undefined quarter, according to its most recent Form 13F filing with the SEC. The firm acquired 9,426 shares of the exchange traded fund's stock, valued at approximately $760,000. Other hedge funds
My portfolio goal is sustainable, stress-free income—prioritizing safety over chasing high yields. Even though it might be very tempting, tilting investments towards 10%+ yields is not the smartest thing to do. The historical stock market annual return figure is around 10%, which is very difficult to meet for income investors, who are usually concentrated into fixed income factor (lower return potential).
HYG (iShares iBoxx $ High Yield Corporate Bond ETF) offers steady carry with limited volatility, tracking the Markit iBoxx USD Liquid High Yield Index. About half the portfolio is pro-cyclical, making HYG sensitive to economic cycles but offering reliable income with 17 years of consecutive dividends. Current macro conditions—narrowing credit spreads, resilient economy, and anticipated rate cuts—support a medium-term outlook for capital gains plus carry.
Yield for traditional income sources have started to compress. For income-oriented investors, who seek to build a reliable passive income machine it causes a real headache. To hit a certain target income figure, investors have to assume either higher risks, extend time horizon or save/invest more capital.
The theme of Don Kaufman's (@Theotrade) Big 3 revolves around what he considers shaky all-time highs. He explains how "financial plumbing issues" will create a flush in Goldman Sachs (GS) and the iShares iBoxx High Yield Corporate Bond ETF (HYG), and how Amazon (AMZN) ran too high on A.I.
Corporate bonds that are below investment grade status may be less likely to default now. But investors still need to be careful.
The current economic environment is marked by persistent inflation and a weakening labor market, raising uncertainty and risk for investors. Despite these risks, large-cap equities, tech stocks, and high-yield credit continue to climb, defying expectations of repricing. Income-focused assets like real estate, financials, dividend growth (SCHD), and quality CEFs (UTG, PDI) now offer lower yields as well.
The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) is doing relatively well this year, and is hovering at its all-time high as demand among investors jumped. HYG stock was trading at $81.23, up by 10% above the lowest level this year.
iShares Preferred and Income Securities ETF (PFF) is favored over iShares High Yield Corporate Bond ETF (HYG) as the Fed has entered an easing cycle. PFF offers higher yield, better credit quality, and lower fees than HYG, with recent outperformance driven by expectations of falling rates and economic uncertainty. PFF's sector concentration in financials and lower diversification present risks, but Fed stress tests show banks are well-capitalized for downturns.
Pessimistic market sentiment often creates generational buying opportunities. Legendary investors like Warren Buffett have made fortunes by being greedy when others are fearful. Unfortunately, while the data points provide a ground for being fearful, the market is still greedy. We could make a case for experiencing 'the everything bubble'.
Sovereign risks are evident and corporate earnings have impressed. However, these are known factors – it's time to look ahead. We remain bearish high yield credit, with the spread between high yield-to-investment grade narrowing toward the -1 sigma boundary. Fundamentals in high yield credit have probably struck an inflection point. Investment grade fundamentals seem better-off. However, credit spreads are exceptionally narrow.
DHY offers an 8.75% yield, trades at a 2.75% discount to NAV, and has a 5-year NAV total return of 8.56%. The fund is well diversified across sectors such as basic industries, technology, and energy, with 235 issuers and active management, which contributes to its stable results over the years. Even when adjusting for leverage and removing interest expense in favor of HYG, DHY continues to show a better 10-year NAV return.
The iShares iBoxx High Yield Corporate Bond ETF offers strong diversification, low equity correlation, and a 2.89-year duration, limiting interest rate sensitivity. Spreads are currently compressed, with no signs of excessive risk-taking or clear asymmetric recovery opportunities in the credit market. Liquidity and high-yield spreads historically signal stress; current indicators do not suggest an imminent buying opportunity for HYG.
JPMorgan, already the largest manager of actively managed fixed income ETFs, expanded its capabilities with a splash today. The JPMorgan Active High Yield ETF (JPHY) began trading today with the aid of a large external institutional client and $2 billion.
The current environment is uniquely challenging, with uncertainty persisting and no clear catalyst for a recovery. Growth is richly priced, and, in my view, an unattractive space. This makes value and income investor areas relatively more interesting.
Bond ETFs like AGG and SGOV led inflows last week as Treasury yields dropped and equity ETFs saw outflows.
HYG ETF faces significant challenges due to slowing GDP growth, unstable inflation, volatile credit spreads, and rising corporate default probabilities. Credit spread and migration risks are key factors, with our regression showing a steep beta coefficient of 3.77 for credit spreads. We see short-end yields rebounding higher and 10-year yields sinking to around 3%. Positive duration can trigger price gains, but we think spread risk will override the benefits.
Rising tariff turmoil has sparked a run from credit-sensitive instruments, with escalating trade tensions threatening economic stability. Wednesday's GDP print stoked recessionary fears when it showed the U.S. economy contracted for the first time since early 2022.
A riskier part of the bond market is offering yields around 8%, according to a BlackRock strategist