Fixed-Income ETFs for Yield: Junk Bonds, Emerging Markets and More
October 4th, 2012 at 10:22am by John Spence
The 10-year Treasury note is yielding an anemic 1.6% so it’s no wonder investors are scouring the bond ETF universe in search of income.
There are the obvious sectors such as high-yield corporate bonds. However, some fixed-income ETFs reside off the beaten path such as emerging market bond funds that might appeal to investors trying to boost yield in their portfolios.
The fund pays a dividend yield of 7% and holds total assets of $12.5 billion, according to manager State Street Global Advisors. JNK has a one-year total return of 21.3%, according to Morningstar. [High-Yield ETFs]
“Typically, speculative-grade bonds come with attractive yields because of their inherently riskier nature. However, default rates remain significantly depressed,” Lydon told IBD. “Meanwhile, corporate America is still sitting on a lot of cash, and balance sheets have been at their best in years.”
Daniel Weiskopf, managing director of Forefront, said his firm has overweight positions in Market Vectors High-Yield Muni ETF (NYSEArca: HYD), SPDR Barclays Capital Convertible Bond (NYSEArca: CWB) and PIMCO Total Return ETF (NYSEArca: BOND).
“The secondary market seems poised for municipal bond prices to move higher,” says James Colby, a portfolio manager and senior municipal strategist at Van Eck Global. [Muni Bond ETFs]
Weiskopf said he’s also long iShares JPMorgan USD Emerging Markets Bond (NYSEArca: EMB). ETFs that invest in emerging market debt can provide diversification and attractive yields. [Finding the Best ETFs for Emerging Market Bonds]
John Graves, managing principal of the Renaissance Group, told IBD he likes PowerShares Emerging Markets Sovereign Debt (NYSEArca: PCY) for the fourth quarter. The ETF holds assets of $2.3 billion and offers a 12-month yield of 4.7%, according to Invesco PowerShares.
“The current components are the sovereign debts of Vietnam, Pakistan, Romania, Korea, Qatar and Turkey,” Graves said in the report. “The risk is certainly higher than that from stronger balance sheet nations such as … . Well, there aren’t many of those left these days, are there?”
PCY charges an expense ratio of 0.5%. [Emerging Market Bond ETFs with Attractive Yields]
PowerShares Emerging Markets Sovereign Debt
Full disclosure: Tom Lydon’s clients own JNK and EMB.
The opinions and forecasts expressed herein are solely those of John Spence, 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.