BondBloxx USD High Yield Bond Energy Sector ETF

XHYE

Market cap $11.7M

Headline yields in high-yield bond ETFs can be misleading; CCC-rated bond exposure is the key driver of credit risk and potential return drag. Chasing the highest yield often backfires—risk-adjusted returns, not just headline yields, provide a clearer picture of long-term performance. Active ETFs typically have lower CCC exposure and higher risk-adjusted returns than passive ETFs, despite slightly higher expense ratios.

Macroeconomic uncertainty may have mounted in March, but high yield industry sectors still displayed room to grow. BondBloxx commentary noted that in March, total return performance was positive for all seven high yield industry sectors.

Despite any potential headwinds, the U.S. economy is continuing to show signs of resilience. For the week ended March 16, the Labor Department noted that claims for state unemployment benefits were falling.

Last year, the market consensus was that there would be a recession in the second half of 2023. Instead, economic indicators have consistently outperformed market expectations.

The U.S. economy defied expectations in 2023, avoiding a recession thanks to lowered inflation and a strong labor market. And after an abysmal year for fixed income in 2022, fixed income markets rebounded last year.

High yield fixed income has always been considered a riskier investment relative to other bonds. But strong corporate fundamentals are making this asset class far less risky these days.