Investors have flocked to junk bonds in search of income with the 10-year Treasury note currently yielding less than 2%, while CDs, savings accounts and money market funds are paying essentially zero. High-yield bond ETFs are seen as a play on a recovering economy while corporate defaults remain low, and companies have repaired their balance sheets in the wake of the financial crisis. [Junk Bond ETFs: Yields Fall to New Record Low]
HYG and JNK are trying to break out to their highest levels since 2008. However, some analysts say it’s mathematically impossible for the funds to increase much further in price, and rising interest rates are another risk for the asset class. [High-Yield ETFs Eye Multiyear Highs; ‘Gravity’ About to Kick In?]
iShares iBoxx High Yield Corporate Bond
Full disclosure: Tom Lydon’s clients own HYG and JNK.