Some High-Yield Bond ETFs Skirt Duration Risk

HYS has a direct competitor in the form of the SPDR Barclays Short Term High Yield Bond ETF (NYSEArca: SJNK). SJNK is slightly newer than HYS with a March 2012 debut date, but the short-duration equivalent of the SPDR Barclays High Yield Bond ETF (NYSEArca: JNK) already has almost $2.9 billion in AUM and boasts a 30-day SEC yield of 3.92%, according to State Street data.

SJNK has a modified adjusted duration of just over two years and an annual expense ratio compared to 0.55% on HYS. SJNK is rated underweight by S&P Capital IQ.

S&P Capital IQ also has an underweight rating on the PowerShares Global Short Term High Yield Bond Portfolio (NYSEArca: PGHY). However, it should be noted that S&P Capital IQ has an overweight rating on PGHY’s holdings and liquidity, both of which are critical in assessing a fund such as PGHY that has significant global exposure. [Fight Rising Rates With an International Short-Duration ETF]

PGHY is the newest of the ETFs mentioned here having debuted in June, but that should diminish its allure. More than half of the fund’s geographic weight is allocated to the U.S. and 75% of its 135 holdings are rated BBB, BB or B, according to issuer data.

PGHY’s low effective duration of 1.36 years helps the fund cope in a rising rate environment and its fees are just 0.35% per year. Notably, the rookie ETF has outpaced more conservative U.S.-focused short-duration ETFs as well as high-grade corporate and emerging markets bond funds since coming to market. [New Junk Bond ETF Deserves More Attention]

SPDR Barclays Short Term High Yield Bond ETF

 

Tom Lydon’s clients own shares of JNK.