Now that investors are returning to high-yield corporate bond funds, the iShares iBoxx $ High Yield Corporate Bond (HYG) exchange traded fund (ETF) could continue to climb. Having just launched in April, HYG is currently up 4.1% for the month. 

Investors added money last week to these high-yield bonds for the first time in 12 weeks, reports Bryan Keogh for Bloomberg. This could indicate that the panic of money markets clamming up could be leaving. Investment-grade bonds have returned an annualized 14.5% this month, compared with 3.4% in July, according to Merrill Lynch index data.

Another factor that could give HYG a boost is the Federal Reserve’s encouraging announcements this morning. The Fed Chairman Ben Bernanke said the central bank is closely monitoring the markets and will do what is necessary to prevent the credit market’s problems from spreading into other areas. Bernanke indicated the Fed is prepared to cut the discount rate further or use other tools to reduce market strains, according to Craig Torres and Scott Lanman for Bloomberg. Knowing the Fed is willing to step in if needed, could be giving investors an extra sense of security.

Tags: Bond ETFs, Federal Reserve