In November, companies issued a record amount of junk-rated bonds, with U.S. high-yield issuance totaling $30.65 billion, compared to $18 billion in the same month last year, as issuers were lured by low interest rates, writes Michael Aneiro for The Wall Street Journal. Currently, $261 billion in new high-yield bonds have been issued this year, up from $145.8 in the same period last year. [Junk Bond ETFs: Are They for You?]
High-yield, high-risk or junk debt is rated below Baa3 by Moody’s ratings firm and BBB- by the S&P.
If you’re looking for yield and you’ve got confidence in what’s happening in the markets here and overseas, take a look at junk bond ETFs for diversified exposure to this market. Be aware that while defaults are falling and junk ETFs mitigate some of the risks of this asset class, it’s still junk debt. A strategy will help protect you – we use a simple trend following one for our clients, which you can read more about here.
For more information on junk bonds, visit our junk bonds category.
- iShares iBoxx $ High Yield Corporate Bond (NYSEArca: HYG): yields 7.97%
- SPDR Barclays Capital High-Yield Bond (NYSEArca: JNK): yields 8.44%
- PowerShares Fundamental High Yield Corporate Bond (NYSEArca: PHB): yields 6.77%
For full disclosure, Tom Lydon’s clients own JNK.
Max Chen contributed to this article.