Of the $181 billion in total BAB debt issued, less than 10% of it has coupons under 4% and maturities less than ten years, according to JP Morgan.
What the near-term outlook for Build America Bonds boils down is to investors taking two-fold risk just to chase yield. Those risks being that interest rates will not rise and that these bonds can withstand government subsidy reductions. Recent price action in the ETFs highlight the suddenly elevated risk associated with a group of bonds investors did not expect to be this volatile.
PowerShares Build America Bond Portfolio
ETF Trends editorial team contributed to this article.