High-yield bond ETFs continue to march higher despite some recent weak economic data. [High-Yield Bond ETFs Shrug Off Woeful Jobs Report]

“With defaults low, balance sheets healthy and rates going nowhere anytime soon, this playbook grows ever more popular,” writes Josh Brown at the Reformed Broker blog.

“The combination of negative real yields in high quality bonds, yet on average reasonably healthy corporate fundamentals, support taking credit risk over interest rate risk,” Merrill Lynch Wealth Management said in areport. “We do not see credit metrics flashing red yet and as long as corporations are maximizing their profit margins, we are comfortable that the extra risk in higher yielding bonds has the potential to be rewarded. We remain on the lookout for any signs of weakness in corporate balance sheets and while the rate of improvements has slowed, overall non- financial balance sheets remain healthy.”

SPDR Barclays High Yield Bond ETF

Full disclosure: Tom Lydon’s clients own HYG and JNK.