Compared with other weighting schemes, such as equally weighted, value-weighted fixed income indexes are tilted toward issuers with higher levels of debt. The more an issuer or sector borrows, the greater the tilt toward that issuer in the index. Leverage and creditworthiness are negatively correlated, so a value-weighted index will be more susceptible to credit quality deterioration than an equally weighted index will be.
This surprises me. First since higher levels of debt don’t imply higher levels of leverage. Second, I would have expected that Value-weighted would be more tilted towards large market-cap established companies which I would have expected have higher credit quality on average than lower market cap companies.