High-Yield Bond Investors Have More ETF Options
April 20th 2012 at 12:00pm by Tom Lydon
With interest rates at historic lows and Treasury prices at an elevated level, investors are expanding their fixed-income horizons. Meanwhile, exchange traded fund providers have taken notice and are now offering a wider range of high-yield bond funds.
Fixed-income assets help offset volatility from the equities market and may even provide capital appreciation during down stock markets, writes Roger Nusbaum for TheStreet.
Traditional, safe-haven Treasuries and related ETFs, like the iShares Barclays 7-10 Year Treasury ETF (NYSEArca: IEF), attracted heavy inflows following stock market plunge during depression. However, their run has not been abated, and yields on 10-year Treasury notes sit at around 2%.
Consequently, investors have turned to high-yield options like the iShares iBoxx $ HY Corp Bond Fund (NYSEArca: HYG), which has a 7.31% yield, and the SPDR Barclays High Yield Bond (NYSEArca: JNK), which has a 7.32% yield.
More recently, fund providers have added to their fixed-income lineups. For instance, Van Eck recently launched the Market Vectors Fallen Angel High Yield Bond ETF (NYSEArca: ANGL), which includes bonds that were once rated investment grade when they were first issued but have since been cut to non-investment grade status. ANGL offers an average yield to worst of 7.48% and has an expense ratio of 0.40%. [Market Vectors Launches ‘Fallen Angels’ ETF]
BlackRock also came out with a new high-yield bond ETF based on the emerging markets – the iShares Emerging Markets High Yield Bond Fund (BATS: EMHY). The fund has an expense ratio of 0.65%. What makes this fund interesting is that its portfolio includes global economies that most other funds do not provide access to, such as Lebanon and Nigeria at 4% each. [iShares Lists New High-Yield ETFs]
Nevertheless, it should be noted that these are still known as junk bonds and are more correlated with movements in the equities market. In any fast market declines, junk bonds will trade like any risky asset.
For more information on high-yield generating bonds, visit our high-yield bonds 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.