Investors have pumped about $5 billion into the two largest exchange traded funds for high-yield or “junk” bonds this year. They’re chasing the juicy yields and capital appreciation that high-yield ETFs have enjoyed.
The $13.7 billion iShares iBoxx High Yield Corporate Bond (NYSEArca: HYG) has pulled in $2.7 billion of net inflows in 2012, according to research from ConvergEx Group. SPDR Barclays High Yield Bond (NYSEArca: JNK) has seen inflows of $2.2 billion and holds $11.6 billion in assets.
Paltry rates in U.S. Treasuries and an obsession with yield have caused more investors to explore junk bond ETFs. [ETF Spotlight: High-Yield Bonds]
The iShares ETF has a 30-day SEC yield of 6.6%, while SPDR Barclays High Yield Bond offers 6.7%. [Search for Yield Drives Record Fixed-Income ETF Buying]
The junk bond ETFs have seen their price rise in recent months with investors getting comfortable with taking on more risk. Improved corporate balance sheets, low defaults and a hunger for yield have helped fuel the buying in the ETFs.
SPDR Barclays High Yield Bond is up 8.9% over the past three months, according to Morningstar.