USHY: A Practical Guide Of HY
The iShares Broad USD High Yield Corporate Bond ETF offers diversified exposure to US high-yield corporate bonds with a low 0.08% fee. USHY's portfolio is broadly diversified across sectors and issuers, with most weighting in BB and B rated bonds, minimizing idiosyncratic risk. Current macro indicators, such as the ISM manufacturing PMI and high-yield risk premium, suggest a neutral environment for USHY, with moderate contraction and stabilizing trends.
USHY: We Were Maybe Wrong About Inflation
More neutral on inflation risks given recent moderate CPI amid encouraging jobs data. USHY remains sensitive to overall YTM changes with 3-year duration, but the reduced evidence of stagflation reduces the inflation and credit spread pressure. Tariff risks persist, with reciprocal tariffs still not out of the picture, but we do point to moderating data such as low export exposure of the US economy.
3 Reasons Why USHY's Yield Could Still Be Attractive Despite Its Low Spread Over IG Bonds
My initial pessimism on USHY was too severe; deeper analysis shows a less wicked outlook for 2025 despite low spread levels. USHY holds exposure to BB and B-rated bonds, which in 2025 experienced a default rate below the historical average. Rising net leverage in IG bonds may increase fallen angels, suggesting the market is pricing in this risk rather than mispricing HY risk.
USHY: Yield Spread Hits A New Low Vs. Investment-Grade Bonds (Rating Downgrade)
The narrowing spread between U.S. investment-grade yields and high-yield bonds has become a risk to consider. Historically, high-yield bonds underperform during periods of spread expansion, as seen in 2018 and 2020. The current divergence between the yield spread and the VIX index indicates rising market volatility and declining risk perception.
USHY: Largest High-Yield Corporate Bond ETF, Good 6.6% Dividend Yield And Performance
iShares Broad USD High Yield Corporate Bond ETF is the largest high-yield corporate bond ETF in the market. It yields 6.6% and has performed reasonably well since inception. USHY is a solid income ETF and one without significant advantages or disadvantages to high-yield peers.
USHY: A Low-Fee Junk Bond ETF
iShares Broad USD High Yield Corporate Bond ETF is the largest “junk bond” ETF, based on assets under management. The USHY ETF has an attractive yield, but its price has suffered a 12% decay since 2017 and distributions have not kept pace with inflation. USHY has a very cheap fee and outperformed most competitors, but it lags “fallen angels” funds.
