USHY ETF offers cheapest US high-yield bond exposure but risks rise if spreads widen beyond 350 bps.
The iShares Broad USD High Yield Corporate Bond ETF (USHY) is currently the most cost-effective way to invest in US high-yield bonds, with a low expense ratio of 0.08%. It has delivered about 8% total return over the past year, mainly from coupon income. However, the fund faces risk if the option-adjusted spread (OAS) on US high-yield bonds widens beyond 350 basis points, which could cause significant price drops. The fund's heavy exposure to lower-rated CCC bonds adds risk, especially if default rates rise. Investors should monitor spread levels and default rates closely in the coming year to manage risk.
The iShares Broad USD High Yield Corporate Bond ETF (USHY) is currently the most cost-effective way to invest in US high-yield bonds, with a low expense ratio of 0.08%. It has delivered about 8% total return over the past year, mainly from coupon income. However, the fund faces risk if the option-adjusted spread (OAS) on US high-yield bonds widens beyond 350 basis points, which could cause significant price drops. The fund's heavy exposure to lower-rated CCC bonds adds risk, especially if default rates rise. Investors should monitor spread levels and default rates closely in the coming year to manage risk.
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