IG Corporate (LQD) vs Short Treasury (SHY)
Live side-by-side comparison with current values, changes, and key statistics.
Why This Comparison Matters
LQD/SHY captures both duration and IG credit risk over short-duration Treasuries. LQD outperformance during falling-rate cycles is driven by both duration and credit spread tightening. SHY outperformance during rising-rate cycles reflects both duration underperformance of LQD and credit spread widening.
Cross-Asset Analysis
This page pairs IG Credit (LQD) (iShares iBoxx Investment Grade Corporate Bond ETF) against 1-3Y Treasury (SHY) (iShares 1-3 Year Treasury Bond ETF, short duration) to surface the specific macro signal that lives in the cross asset pair relationship. Risk-off regimes tighten correlations and force the IG Credit (LQD)-1-3Y Treasury (SHY) spread into cramped ranges. Structural shifts reshaping IG Credit (LQD) or 1-3Y Treasury (SHY), including retail demand or regulatory changes, can durably recalibrate the relationship.
The Credit & Financial Stress and Bonds & Duration corners of the market share common drivers but vary in sensitivity, and the IG Credit (LQD)-1-3Y Treasury (SHY) spread expresses those sensitivities. Policy interventions can artificially narrow or expand the IG Credit (LQD)-1-3Y Treasury (SHY) spread, most notably when central banks buy specific asset classes. Analysts merge IG Credit (LQD) with 1-3Y Treasury (SHY) to build cross-asset indicators that are more difficult to game than any single-market series.
Implied volatility regimes in IG Credit (LQD) and 1-3Y Treasury (SHY) transmit through dealer flows that link one tape to the other via dealer balance sheets. Macro funds use the IG Credit (LQD)-1-3Y Treasury (SHY) spread to express views cleaner than single-asset trades, distilling the particular macro factor they want to bet on.
90-Day Statistics
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Frequently Asked Questions
What is the relationship between IG Credit (LQD) and 1-3Y Treasury (SHY)?+
IG Credit (LQD) and 1-3Y Treasury (SHY) are connected through shared macro drivers across asset classes. When the dominant macro driver shifts, both respond, though with different sensitivities and at different speeds. The spread between IG Credit (LQD) and 1-3Y Treasury (SHY) captures the specific macro signal that flows through this relationship.
When does IG Credit (LQD) typically lead 1-3Y Treasury (SHY)?+
IG Credit (LQD) tends to lead 1-3Y Treasury (SHY) during macro regime changes, where the more liquid asset moves first. In those periods, moves in IG Credit (LQD) precede corresponding moves in 1-3Y Treasury (SHY) by days to weeks, depending on the transmission channel and the depth of each market.
How are IG Credit (LQD) and 1-3Y Treasury (SHY) historically correlated?+
Long-run correlation between IG Credit (LQD) and 1-3Y Treasury (SHY) varies by regime. Cross-asset correlations vary by regime, tending to tighten in stress and loosen during normal conditions. The correlation is not stable: it shifts with macro conditions, and the periods when it breaks down are often the most informative moments in the IG Credit (LQD)-1-3Y Treasury (SHY) relationship.
What macro conditions drive divergence between IG Credit (LQD) and 1-3Y Treasury (SHY)?+
Divergence between IG Credit (LQD) and 1-3Y Treasury (SHY) typically arises from idiosyncratic shocks in one asset, policy interventions, or structural shifts in demand. When one asset's idiosyncratic drivers dominate, the spread moves in ways that the common macro story does not predict, which is usually a signal to look more carefully at the specific drivers at work in IG Credit (LQD) or 1-3Y Treasury (SHY).
Is IG Credit (LQD) a hedge for 1-3Y Treasury (SHY)?+
Cross-asset hedges between IG Credit (LQD) and 1-3Y Treasury (SHY) work when the macro drivers of the two assets are sufficiently decorrelated, which depends on the regime and therefore needs to be reviewed as conditions change. Effective hedging requires matching the hedge to the specific risk being protected, and the IG Credit (LQD)-1-3Y Treasury (SHY) pair is best stress-tested under scenarios the investor most worries about before being sized into a real portfolio.
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Data sourced from FRED, CoinGecko, CBOE, and other providers. This page is for informational purposes only and does not constitute financial advice. Past performance does not guarantee future results.