Capture credit opportunities with precision in high yield markets
Bloomberg U.S. Corporate High Yield Very Liquid Duration Hedged Index futures were designed to allow participants to efficiently focus on only the credit component of the high yield bond market.
When used in conjunction with Investment Grade or High Yield Credit futures, or via ICS or other spread trading strategies, these contracts allow for new hedging and risk management solutions in the world of credit, giving participants an additional tool for expressing tactical views, implementing relative value trades, hedging or improving liquidity management strategies.
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Features and Benefits
Focused credit exposure
The same benchmark as HYB, but with interest rate risk neutralized.
Capture spread carry
Isolate the spread by focusing on credit, allowing for new trading opportunities.
More effective duration hedge
Less slippage when compared to using a long HY and short UST position.
All-to-all electronic liquidity
Anonymous trading over the CLOB for improved price transparency.
New relative value trading possibilities
Capture arbitrage opportunities through relative value trading across bond index derivatives.
Simplified credit-only access
Treasury hedges require more positions and maintenance with less precision.
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About the underlying index
The contracts track the Bloomberg U.S. High Yield Duration Hedged Index, which is a duration-hedged version of the Bloomberg U.S. High Yield Very Liquid Index, a broad benchmark designed to track a more liquid component of the USD-denominated, high yield, fixed-rate corporate bond market.
Duration is hedged by employing a Mirror Futures Index (MFI) whereby the return reflects a funded set of Treasury futures contracts, weighted to match closely the month option-adjusted duration (OAD) profile of the underlying index. The benchmark will take the return on the underlying cash index along with its OAD exposure hedged using its MFI, plus the MFI funding component to arrive at the final return of the duration hedged index.
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