C$ HY is cheap on a relative value basis to U$ HY. This is probably best measured on a Yield to Worst (YTW) basis. Investors in C$ HY currently receive about 6.54% YTW while investors in U$ HY receive only about 4.86%...a pick up of almost 1.70% in C$ HY!!
Why is that so important?
1. C$ HY lags the U$ HY market both up and down...IE...C$ HY has lower volatility...a very good thing. If you are worried about a sell-off in risk assets and/or HY, C$ HY provides far more cushion because it is cheap right now and will lag on the down trade.
2. And if there is no large sell-off and we just tick along as is, C$ HY still provides almost 1.70% of excess yield vs U$ HY.
Two very important reasons to be long C$ HY vs U$ HY right now. Click on the chart below...C$ HY YTW less U$ HY YTW. Green is C$ HY is cheap. Red is C$ HY expensive.