It was just two months ago that ETFs such as the iShares iBoxx $ High Yield Corporate Bond ETF (NYSEArca: HYG) and the SPDR Barclays High Yield Bond ETF (NYSEArca: JNK) were thrown out with the bathwater amid Federal Reserve tapering and a sudden spike in interest rates.

From the FOMC announcement on May 22 through June 24, HYG and JNK lost a combined $2.7 billion in assets, according to Citigroup research. In the midst of what turned out to be panic selling, questions arose about liquidity in the high-yield corporate debt market and the ability of ETFs to function as intended during times of elevated market stress. [Junk Bond ETFs Thriving Again]

With the May/June slide behind them, junk bond ETFs are once again drawing interest from investors and the inflows data supports that assertion. Since the start of July, HYG has hauled in $1.1 billion in investments this month while JNK has raked in nearly $325 million, according Index Universe data.

The SPDR Barclays Short Term High Yield Bond ETF (NYSEArca: SJNK), which has been embraced by investors due in large part to a modified adjusted duration of just 2.19 years, has pulled in almost $320 million this month. [Investors Jumping Back Into Junk Bond ETFs]

It is not just inflows that highlight investors’ renewed confidence in high-yield bond ETFs; it is price action as well. From its May peak around $96.30 to its June bottom, HYG lost 7.5%, but the ETF closed at $93.74 on Tuesday. JNK’s May peak to June trough decline equaled about $3.25 of which $2 has since been reclaimed. SJNK currently resides just 40 cents below its May high.

Bottom line: Junk bond ETFs may have been down in after the May 22 FOMC news, but they are no longer out.

Subscribe to our free daily newsletters!
Please enter your email address to subscribe to ETF Trends' newsletters featuring latest news and educational events.