ETF Trends
ETF Trends

Market Vectors Fallen Angel High Yield Bond ETF (NYSEArca: ANGL) has caught our attention after an abnormal price spike on Friday followed by a big jump in trading volume yesterday.

ANGL, which holds junk bonds that were rated investment-grade when issued, saw an unusual trade last Friday that sent the ETF up nearly 49%, though volume was not unusual at just over 5,100 shares. The fund’s average daily turnover for the trailing 90 days is just over 5,000 shares. That trade was then “corrected,” at least to some extent, when ANGL proceed to plunged 32.5% on volume that was again only slightly above average Monday. [Bond ETFs and Illiquid Markets]

Foul play does not appear to be at hand, but ANGL did sink 3.5% Tuesday on volume that was nearly 16 times the daily average. The fund is managed by Market Vectors, the ETF unit of Van Eck Global.

“We observed what appears to be a market order that unfortunately traded at a very high price on the market’s close of Friday,” said Van Eck Marketing Director Edward Lopez in an e-mail exchange with ETF Trends. “Be assured that we take these out of the ordinary trades very seriously. We have been in contact with both NYSE Arca and our lead market maker partners to discuss preventing these types of prints from happening in the future. The use of limit orders is strongly encouraged. Also, we do not see any connection with that unfortunate trade and (Tuesday’s) trading volume.”

While the fallen angel bond market may be view as an “inside baseball” terminology by the casual observer, it did account for 13% of the of the U.S. high-yield bond universe last year and the bonds in the Bank of America Merrill Lynch Fallen Angel Bond Index typically have superior credit quality to those found in typical junk bond indices, according to Market Vectors.

Fallen angels also have generated superior returns compared to bonds originally issued with junk status because fallen angels more frequently return to investment-grade status. Bonds such as those held by ANGL outperformed traditional junk bonds last year and during the credit crisis in 2008. [Investors Jumping Back Into Junk Bond ETFs]

Still, the unusual activity in ANGL in recent days may give investors pause and have them questioning whether the ETF frequently trades at alarming discounts or premiums to its underlying net asset value. There were a small amount of days in the second quarter where ANGL traded at premiums to NAV of 2%, 3% or more, but the more prominent trend was to see the ETF at a premium to NAV of 1.5% or less, according to Market Vectors data.

ANGL has an effective duration of just over five years and a distribution yield of 6.31%. Holdings in the ETF include issues from ArcelorMittal (NYSE: MT), SLM Corp. (NYSE: SLM) and Sprint (NYSE: S)

Market Vectors Fallen Angel Bond ETF

ETF Trends editorial team contributed to this post.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.