Bond ETFs That Yield More Than Treasuries
September 21st, 2010 at 3:00pm by Tom Lydon
The U.S. Treasury market has been overbought and investors who are still seeking some fixed-income may want to take a look at other assets and exchange traded funds (ETFs) that are looking more attractive than the Treasury market.
Investors may want to take a look at high-yield corporate bonds, inflation-adjusted Treasuries (TIPs) or tax-free municipal bonds, remarks Alexander Green for InvestmentU.
Muni Bonds. Munis in particular are interesting because they’re exempt from federal income taxes and Bush-era tax cuts may come to an end. They are also, in some cases, exempt from state and local taxes. If tax rates are hiked at any point in the future, it will only heighten the appeal of these bonds. [The Benefits of Muni Bond ETFs.]
High-Yield Bonds. Defaults on high-yield bond ETFs have been declining in the last year and a half and prices have also been increasing, which makes high-yield ETFs rather cheap, comments Jonathan Berstein for ETF Zone. Moody’s projects worldwide default rates will fall to 2.7% by the end of the year and 2% in 2011. High-yield bond ETFs currently yield between 8% and 11%. For the past few years, high-yield ETFs have traded more like equities, but junk bonds have started to trade more like bonds in 2010, with less volatility. [Junk ETFs In Your Portfolio.]
For more information on bonds, visit our bond ETF category. To find high-yielding ETFs in these or other categories, visit the ETF Analyzer. You can easily sort funds by a variety of criteria; we did, and here’s what came up:
- iShares iBoxx High-Yield Corporate Bond (NYSEArca: HYG): yields 9.0%
- SPDR Barclays Capital High Yield Bond (NYSEArca: JNK): yields 10.8%
- PowerShares Fundamental High-Yield Corp Bd (NYSEArca: PHB), yield: 8.4%
- PIMCO Intermediate Municipal Bond Strategy Fund (NYSEArca: MUNI): yields 2.29%
- SPDR Barclays Capital New York Municipal Bond (NYSEArca: INY): yields 3.66%
- Grail McDonnell Intermediate Municipal Bond (NYSEArca: GMMB): yields 2.9%
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.