Tapping into liquidity in the high-yield bond market

How can investors access the potential for greater returns from the high-yield bond market while keeping liquidity risk in check?

While high-yield bonds have generally been excluded from traditional aggregate-type fixed income benchmarks in the past, they remain a growing asset class that has historically offered yields exceeding those of investment-grade debt.

In exchange for incremental yield, however, high-yield bonds can be associated with heightened credit and liquidity risk. Designed to track the most liquid instruments in the high-yield market, the iBoxx US dollar liquid high-yield index has served as this market’s leading benchmark since its debut in 2006, supporting a broad trading ecosystem via exchange-traded funds and derivatives.

This two-part white paper examines the components of the iBoxx US dollar liquid high-yield index that has demonstrated potential mitigation of liquidity risk.

• Tapping into liquidity in the high-yield bond market: part one highlights the growth of the high-yield bond market and the index construction attributes that contribute to the iBoxx US dollar liquid high-yield index liquidity ecosystem. Research measures the effectiveness of the index methodology in current markets through bond-liquidity analysis.

• Tapping into liquidity in the high-yield bond market: part two continues to analyse liquidity in different forms by exploring the fund, derivative and securities lending markets that propagate liquidity.

These white papers are essential reading for investors looking to understand more about accessing liquidity in the high-yield bond market.

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