The secret credit breakdown

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Издатель Mar 24, 2026

LQD and HYG are the two most widely held corporate bond ETFs in the world. Most people use them as a quick read on credit health without looking at the underlying corporate bond ladder.

Right now, they're hiding the story.

Here's why:

1. LQD tracks investment-grade corporate bonds rated BBB- and above. Average duration: ~8 years. That means it moves heavily with interest rates.

2. HYG tracks high-yield bonds rated BB+ and below. Average duration: ~3.5 years. Its price is driven by credit risk, not rates.

3. When the 10-year yield pushes toward 4.5%, LQD gets crushed on duration. HYG barely flinches. That's not a credit signal. That's a rate signal.

4. HYG rallying while LQD sells off looks healthy on the surface. It's not. The duration mask is hiding credit deterioration underneath.

5. 117 large companies filed for bankruptcy in the 12 months ending June 2025. That's 44% above the 20-year average. $1.35 trillion in corporate debt matures this year at nearly double the rate it was issued at.

6. When credit spreads widen, borrowing costs rise. Earnings get revised down. Equity multiples compress. The bond market is already pricing this. The stock market hasn't started.

The two charts everyone relies on are making the signal invisible.

Comment "LETTER" for the full breakdown.