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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
The bond market is facing increased pressure, with long-term Treasuries experiencing significant duration risk due to a potential rise in inflation and lower international demand. HYG's credit quality signals high risk, given that B and BB corporate bond credit spreads recently hit their lowest level since early 2007. Economic indicators suggest a consumer-driven recession, with tariff-related inflation and high government debt limiting the options for stimulus.
The bond market is more than Treasuries. Consider munis, mortgage-backed securities, and investment grade debt.
The final trades of the day with CNBC's Melissa Lee and the Fast Money traders.
HYG is a well-diversified ETF with $15.7 billion in net assets, 1,274 holdings, and an average yield to maturity of 7.17%. To be able to compete with HYG we need to analyze the entire sector of baby bonds. The fixed-income bond sector is analyzed by categorizing bonds above and below par, focusing on credit scores and yields for a comprehensive view.
HYG Vs. LQD: Excess Returns With Lower Duration, Minor Credit Risk Increase
Today, First Trust Advisors announced it is expanding its roster of Target Income ETFs with the launch of three new funds. Each of these Target Income ETFs looks to generate current income with a secondary goal of capital appreciation.
Interest rates are historically high. Bonds often offer higher yields than REITs. Yet, REITs crush them over the long run. Here's why.