High yield credit spreads are currently trading near historically tight levels. The option-adjusted spread (OAS) on the Bloomberg High Yield Index (High Yield Index) is currently 350 basis points (bps), within 40 bps of the post Global Financial Crisis (GFC) low in spreads experienced in January 2018. Given its historical vulnerability to market disruptions, investors may desire to protect themselves against any future spread widening in the high yield bond market.

This Strategy Spotlight explores alternatives for hedging credit exposure in the high yield bond market.