What is credit risk in bond ETFs?

Credit risk is the risk that a bond issuer can't meet its obligations or is perceived as less able to pay (downgrade risk). In bond ETFs, rising credit risk usually shows up as wider spreads and falling bond prices.

Investment-grade bond ETFs generally have lower credit risk than high-yield bond ETFs, but they're not immune. During economic stress, even investment-grade spreads can widen.

To assess credit risk, look at the fund's rating breakdown, issuer concentration, and sector exposure. Credit risk can dominate returns in downturns, even if interest rates are stable.