Junk bond ETFs are trying to break out to their highest price levels since the financial crisis with yields in speculative-grade corporate debt falling to record lows. Investors have been taking on more credit risk in junk bonds in search of yield with the Federal Reserve keeping short-term rates near zero. [Junk Bond ETFs: Yields Fall to New Record Low]
A Bank of America trader offered trades of about $30 million in HYG, in an e-mail listing securities available for sale to clients last month, Bloomberg reported. This credit-swaps index trader also offered trades in about $20 million of shares from JNK. February was the first time that Bank of America’s swaps traders started trading blocks of ETF shares.
“High-yield ETFs tend to be more volatile than the underlying broad market,” said Jason Rosiak, head of portfolio management at Pacific Asset Management, in the Bloomberg story. “It’s a new tool due to their size and liquidity.”
“We’ve seen increasing availability of ETF shares for borrowing and selling short as a hedging vehicle,” BlackRock’s Tucker added.
iShares iBoxx High Yield Corporate Bond
Full disclosure: Tom Lydon’s clients own HYG and JNK.
