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]