High-Yield, Junk Bond ETFs

The average junk-bond fund showed a 2.9% return this year, whereas the average intermediate-term bond fund lost 3.1%, according to Morningstar. Meanwhile, the yield on the Barclays High-Yield Bond Index is a little below five percentage points higher than comparable Treasuries. The high yields also help offset any downside due to rising rates. [Shorting Treasuries Helps Active High-Yield ETF]

“Those higher coupons are going to potentially insulate some of the negative price action of a rising rate environment,” Jennifer Vail, head of fixed income for U.S. Bank Wealth Management, said in the article.

Investors interested in high-yield, junk bonds can take a look at a couple ETF options, including the iShares iBoxx High Yield Corporate Bond (NYSEArca: HYG) and SPDR Barclays High Yield Bond (NYSEArca: JNK). HYG has a 4.22 year duration and a 5.56% 30-day SEC yield, and JNK has a 4.45 year duration and a 5.88% 30-day SEC yield. Additionally, investors can trade off yields for a safer, lower duration found in the PIMCO 0-5 Year High Yield Corporate Bond Index ETF (NYSEArca: HYS), which has a 2.03 year duration and a 3.70% 30-day SEC yield.

For more information on speculative grade debt, visit our junk bonds category.

Max Chen contributed to this article.

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