PGHY’s credit quality includes BBB 3%, BB 49%, B 25% and CCC 2%.
Additionally, the PowerShares ETF’s low effective duration of 1.59 years helps the fund cope in a rising rate environment. Duration is a measure of a fund’s sensitivity to interest rate changes, and high durations will have a greater negative impact on an ETF’s performance as interest rates rise.
Over the past month, PGHY’s low-duration and international exposure has helped the fund outperform high-yield, junk bond ETFs that focus on the U.S. bond market. PGHY has gained 0.2% over the last month, whereas the SPDR Barclays High Yield Bond (NYSEArca: JNK), which has an average duration of 4.46% years and a 5.81% 30-day SEC yield, is down 1.0% over the past month. Additionally, the iShares Global High Yield Corporate Bond ETF (NYSEArca: GHYG), which has a 60.9% weighting toward the U.S., an effective duration of 3.92 years and a 5.26% 30-day SEC yield, is 1.1% lower in the past month.
For more information on high-yield bonds, visit our high-yield bonds category.
Max Chen contributed to this article.
Full disclosure: Tom Lydon’s clients own JNK.