U.S. Corporate Bond ETF Falls for Third Consecutive Month as Equity Markets Hold Near Record Highs

According to CNBC on July 27, the iShares iBoxx USD High Yield Corporate Bond ETF declined approximately 1% this month and is expected to extend losses for a third consecutive month, marking its fifth monthly decline in six months. Meanwhile, the S&P 500, though down more than 2% from its early June record high, remains trading near its peak supported by sector rotation.

Federal Reserve rate hike expectations have surged significantly. CME FedWatch data shows market participants are now pricing in a 34% probability of a rate increase at the upcoming FOMC meeting, more than double the 16% probability from one week prior. The U.S. 2-year Treasury yield hit 4.322% on July 27, reaching a new high for the year. Rob Ginzburg, technical analyst at Wolfe Research, stated that "the bond chart is beginning to look like a major topping process," while noting potential downside risk to March lows.