The largest junk bond ETF is in a seven day rally to break out to its highest level since the financial crisis as investors continue to embrace high-yield funds for income with the Federal Reserve committed to keeping rates low.
The iShares iBoxx High Yield Corporate Bond (NYSEArca: HYG) has posted a total return of 11% so far this year and attracted net inflows of nearly $5 billion. The $16 billion ETF pays a 30-day SEC yield of 5.7%, according to sponsor BlackRock (NYSE: BLK).
Meanwhile, the $12.3 billion SPDR Barclays High Yield Bond (NYSEArca: JNK) has brought in $2.9 billion of inflows year to date, according to IndexUniverse.
The breakout in high-yield ETFs is positive for equities because they are seen as a fairly reliable leading indicator of the stock market. Still, some technical analysts are worried that the breakout has coincided with fading momentum and volume in the junk bond ETFs. [High-Yield ETF Breakout Holds Key for Stocks]
High-yield bond funds have hauled in a record $69.5 billion of net inflows in 2012 although the category has seen outflows in recent weeks.
Turning point?
“Investors’ infatuation with high-yield-bond funds might have finally run its course, and that could be a sign of an inflection point in fixed-income investing,” reports Jeff Benjamin at InvestmentNews.
The year-to-date inflows are more than double the previous full-year record of $31.8 billion in 2009. Last year, high-yield-bond funds had net inflows of just $8.3 billion, according to the report.