Vanguard launches 5-bp U.S. high-yield corporate bond ETF

Vanguard began trading the Vanguard U.S. High‑Yield Corporate Bond Index ETF (VCHY) on June 4 on the Cboe BZX exchange. The fund carries a 0.05% expense ratio and uses a sampling approach to replicate the Bloomberg US High Yield $250 Million 2% Issuer Capped Index.

The benchmark targets corporate bonds rated BB+ or lower with at least $250 million outstanding. The ETF holds primarily the securities that make up the index. A 2% issuer cap limits exposure to any single borrower to reduce issuer concentration.

High‑yield corporate bonds pay higher coupons to compensate investors for greater default risk than higher‑rated debt. These bonds respond to both changes in interest rates and the credit health of companies and often have different return patterns and correlations than government bonds.

Market conditions that include yields at higher structural levels and lower transaction frictions have increased the influence of management fees on net returns, particularly when credit spreads are narrow. VCHY’s five‑basis‑point fee provides indexed exposure to lower‑grade corporate credit at a low headline cost.

Vanguard operates a broad fixed‑income ETF lineup. The Vanguard Total Bond Market ETF (BND) was the first bond ETF to exceed $100 billion in assets. The firm expanded its high‑yield offerings with the Vanguard High‑Yield Active ETF (VGHY), launched in September, which focuses on medium‑to‑lower credit quality bonds with shorter maturities and aims for roughly 40 basis points of outperformance versus its reference index.

The new ETF gives investors a way to access U.S. high‑yield corporate bonds through a rules‑based index that enforces issuer limits and a minimum issue size while employing sampling to approximate the index’s risk and return profile.