ETF Spotlight: High-Yield Bonds
February 10th 2012 at 7:21am by Tom Lydon
ETF spotlight on SPDR Barclays High Yield Bond (NYSEArca: JNK), part of an ongoing series.
Assets: $11.1 billion.
Objective: The SPDR Barclays High Yield Bond tries to reflect the performance of the Barclays Capital High Yield Very Liquid Index, which follows publicly issued U.S. dollar-denominated high yield corporate bonds with above average liquidity.
Holdings: The fund holds industrial, utility and financial corporate debt with a BB or lower rating and a modified adjusted duration of 4.4 years.
What You Should Know:
- State Street Global Advisors sponsors the fund.
- JNK has an expense ratio of 0.40%.
- The fund holds 223 securities.
- Sector allocations include industrial 85.4%, utility 7.9% and finance 6.2%.
- JNK offers a dividend yield of 7.42%.
- The ETF is up 3.5% over the last month, up 5.0% over the past three months and up 3.6% year-to-date.
- The fund is 2.3% above its 200-day exponential moving average.
- “With increased leverage comes the increased probability of default and bankruptcy,” according to Timothy Strauts, Morningstar analyst. “In the grand scheme of things, risk equals return, and the high yield of these bonds is designed to compensate investors for this risk.”
- “Yields are always best viewed relative to what Treasury bonds are doing, and the resulting difference is known as the credit spread – the additional risk that you are being paid above the risk-free rate,” Strauts added.
The Latest News:
- High-yield bonds are attracting a surge in investor appetite for risk-taking and yields, reports Sam Forgione for Reuters. [ETF Chart of the Day: High-Yield Corporate Bonds]
- Over the last six months through January, high-yield funds, excluding ETFs, brought in $8.8 billion, compared to U.S. Treasury adding $400 million, according to Lipper data. [Investors Flocking to Emerging Market, High-Yield ETFs]
- “There’s a dearth of available yield in other types of bond sectors, especially high quality bonds,” Miriam Sjoblom, a mutual fund analyst at Morningstar, said in the article. “We think the returns relative to the risk are very attractive. We believe we can generate equity-like returns but be better protected by the capital structure.”
- “Within a certain range, the deceleration in corporate earnings is positive, because it makes equities less attractive and high-yield more attractive relatively,” Martin Fridson, global credit strategist at BNP Paribas and former chief high yield strategist at Merrill Lynch, said.
SPDR Barclays High Yield Bond
For past stories in this series, visit our ETF Spotlight category.
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.