The Bloomberg U.S. Corporate High Yield Index (also known as the Bloomberg High Yield Bond Index) is a widely followed benchmark that tracks the performance of below-investment-grade (junk) corporate bonds issued in the U.S. dollar-denominated market.
What It Consists Of:
- Eligible Bonds:
- Credit Rating: Bonds rated Ba1/BB+ or lower by Moody’s, S&P, or Fitch (i.e., non-investment grade).
- Currency: U.S. dollar-denominated.
- Maturity: At least 1 year remaining to maturity.
- Issue Size: Minimum of $150 million (to ensure liquidity).
- Type: Fixed-rate, taxable bonds (no convertible bonds, floating-rate notes, or preferred securities).
- Exclusions:
- Bonds from issuers in default.
- Bonds with embedded options (like callable bonds) unless they meet certain criteria.
- Private placements, structured notes, and bonds from certain sectors (e.g., supranational agencies).
- Sector Coverage:
- Includes a broad range of industries such as energy, healthcare, telecommunications, consumer goods, financials, etc.
- Weighting & Methodology:
- Market-value weighted (larger issuers have more impact).
- Rebalanced monthly to reflect new issuances, maturities, and rating changes.
What It Is Used For:
- Benchmarking Performance:
- Investors and fund managers compare their high-yield bond portfolios against this index to gauge performance.
- Market Health Indicator:
- The index’s yield spreads (vs. Treasuries) reflect credit risk sentiment—widening spreads suggest higher perceived risk.
- Investment Products:
- Serves as a basis for ETFs (e.g., HYG, JNK) and mutual funds that track high-yield debt.
- Economic Analysis:
- Trends in the index can signal shifts in corporate credit conditions and economic outlook.
- Risk Assessment:
- Helps analysts assess default risk, liquidity risk, and sector trends in speculative-grade debt.
Alternatives & Related Indices:
- Bloomberg U.S. Corporate Bond Index (investment-grade counterpart).
- ICE BofA U.S. High Yield Index (a competing benchmark).
- S&P U.S. High Yield Corporate Bond Index.