The seemingly unstoppable rally in junk bond ETFs continues apace with yields in speculative-grade corporate debt falling to new record lows this week.
SPDR Barclays High Yield Bond (NYSEArca: JNK) and iShares iBoxx High Yield Corporate Bond (NYSEArca: HYG) have posted total returns of more than 10% for the trailing year. In a low-rate environment for bonds, investors have been drawn to the funds’ capital appreciation and above-average yields. Of course, there are lingering fears the ETFs’ popularity could end in tears as investors stretch for income by taking on more credit risk. [High-Yield ETFs Eye Multiyear Highs; ‘Gravity’ About to Kick In?]
On Tuesday, yields on speculative-grade debt fell to a record low of 5.56%, resuming their plunge after falling below 6% for the first time in January, reports Patrick McGee at The Wall Street Journal.
The two largest high-yield bond ETFs are paying 30-day SEC yields of just over 5%. [Comparing the Two Largest High-Yield Bond ETFs]
The latest week’s flow data revealed that investors are migrating back to high-yield ETFs and mutual funds after recently pulling cash on fears the asset class is overheated.