High Yield ETF (HYG) showing the pressure
But they market mechanism is working so far
There is a lot being said about the High Yield bond market with the redemption of some Junk bond funds over the last few days of trading.
The most active ETF that mimics a basket of junk bonds is the HYG (iShares IBoxx $ HIgh Yield Corporate Bond ETF). That ETF is down 12.80% on the year. For those who got in since the end of October, the index has moved down 9.15% since peaking on October 23rd (see chart below).
From a longer term technical perspective, the weekly chart is testing some support from swing lows going back to May 2010 at 78.96 and October 2011 at 77.90. The 50% oof the move up from the 2009 low comes in at 78.90. A move below this support area might be another push to lower levels.
Bloomberg has a nice piece on the index and how the market was able to absorb the illiguid markets last week. There was not a whole lot of redemptions that needed to be done within the underlying instruments despite the high volume. The reason is most of the trading was offset by other traders (so there were buyers and sellers). If the action was more one, way, they might have had a more difficult time in the more illiquid cash market that underlies the ETF.
Anyway, you can read the article, by CLICKING HERE.