Many investors frustrated with low Treasury yields are seeking to add extra income with junk bond ETFs, and the asset class has performed well with defaults staying low.
“Following this rally, the yield to maturity for high yield is roughly 7% or nearly a 500 basis point premium to the 10-year Treasury. That’s close to fair value,” writes Koesterich at the iShares blog.
“Investors in high yield are still picking up significant incremental yield, and given strong corporate balance sheets, I don’t expect any significant pickup in default rates. But as the asset class no longer appears as inexpensive as it was last fall, I wouldn’t advocate aggressively putting new money to work in high yield,” said Koesterich, adding that he prefers investment grade corporate bonds and municipals.
iShares iBoxx High Yield Corporate Bond
