Investors Bet Against Junk Bond ETF Yielding 6%

December 14th at 12:00pm by Paul Weisbruch, Street One Financial

Today we point out heavy put activity in generally infrequently traded iShares iBoxx $ High Yield Corporate Bond (NYSEArca: HYG) options. This particular ETF is often seen as a “risk-on” play in that it targets exposure to high yield “junk” bonds, so it is very possible that a bearish speculator is looking for a reversal in the high yield corporate market (note that HYG traded at a new 52 multi-year high just as recently as Wednesday of this week).

It is also quite reasonable that a large institutional long term holder of the ETF is hedging an underlying position in HYG via these put trades. HYG has been a winner in 2012, rallying 4.52% YTD with trailing one year performance of +7.90%.

Yield thirsty investment managers have likely been attracted to the fund (30 Day SEC Yield of 5.58%) in 2012, as the ETF has reeled in an impressive $4.7 billion just year to date. [High-Yield ETFs Rallying to Cap Historic Year]

Top holdings in HYG currently are corporate bonds issued by the following companies 1. Sprint Nextel (0.62%), 2. CIT Group (0.59%), 3. HCA (0.52%), 4. Intelsat (0.50%), and 5. First Data (0.49%).

Other ETFs in the high yield arena that may see accelerated trading activity going into year’s end as portfolio managers re-balance portfolios likely giving a ton of consideration to their views on future tax policy, and given the performance in the space YTD include SPDR Barclays Capital High Yield Bond (NYSEArca: JNK), Peritus High Yield (NYSEArca: HYLD), PowerShares Senior Loan Portfolio (NYSEArca: BKLN), PowerShares High Yield Corporate Bond (NYSEArca: PHB), PIMCO 0-5 Year U.S. High Yield Corporate Bond (NYSEArca: HYS) and (SPDR Barclays Capital Short Term High Yield Bond (NYSEArca: SJNK) to name a few. [Senior Bank Loan ETFs Yielding 5%]

iShares iBoxx $ High Yield Corporate Bond

high-yield-etf

For more information on Street One ETF research and ETF trade execution/liquidity services, contact Paul Weisbruch at pweisbruch@streetonefinancial.com.

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