The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) is turning 10 years old this week.
Looking back a decade, few then would’ve thought investors would be able to trade more than 1,000 high-yield bonds at a penny spread on a stock exchange. HYG was a massive feat of innovation—one of many ETFs that truly democratized access to difficult-to-reach pockets of the market.
To mark the anniversary, we caught up with Steve Laipply, product strategist for BlackRock's Model-Based Fixed Income Portfolio Management Group, to talk about this ETF, the innovation it represented and the misconceptions that still surround it. Here are some key takeaways from our chat:
Timing Of The Launch
HYG came to market in early 2007, on the eve of the big financial crisis, if you will. It was a turbulent time for the market, and one might think not the best time to be rolling out the first high-yield bond ETF.
But iShares had already some experience with fixed-income ETFs and a good understanding of what to expect, Laipply says.
“The financial crisis actually offered us our first inkling of how HYG—and for that matter, LQD [iShares iBoxx $ Investment Grade Corporate Bond ETF]—could be very valuable tools for investors to both observe the market as well as manage risk,” he noted.
“That time period was, in our view, when investors woke up to the idea that even if the bond market was not trading in its full capacity, these products were observable on exchange and they could trade them, even through the most difficult periods of the crisis,” Laipply added.