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Junk Bonds Did Better Than the Stock Market Yesterday


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Junk bonds sank on Wednesday, but held up much better than the Dow Jones Industrial Average, which fell more than 800 points.

On Wednesday, high-yield ETFs iShares iBoxx $ High Yield Corporate Bond (HYG) and SPDR Bloomberg Barclays High Yield Bond (JNK) fell 0.8% and 0.7%, respectively. Those were their lowest prices since November 2016, following a stock-market slump.

That doesn't necessarily say much about the market's valuation, of course, since spreads over Treasuries are the most important gauge of market valuation for bonds. While spreads have been rising, just one week ago they fell to their lowest level since the financial crisis. In other words, there's no sign of panic in the selling just yet.

"It's orderly at this point, but it is presenting opportunities," said John McClain, a portfolio manager with Diamond Hill. "We typically get more excited when you see things like the ETFs being down 1% on the day."

But after the market reached such high valuations, the selloff did create some chances to buy. He said he's focusing on higher quality credits, and that sectors such as chemicals and autos are starting to look like better places to put cash.

Write to Alexandra Scaggs at alexandra.scaggs@barrons.com

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , Investing Ideas
Referenced Symbols: HYG , JNK



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