Investors interested in high-yield bond ETFs can take a look at other options like the rival SPDR Barclays High Yield Bond ETF (NYSEArca: JNK), PIMCO 0-5 Year High Yield Corporate Bond Index (NYSEArca: HYS) and the actively managed AdvisorShares Peritus High Yield ETF (NYSEArca: HYLD). [Bond ETFs: The New Black]
However, advisors are beginning to weigh the risks of a rising rate environment on high-yield bonds.
“Our bigger concern is what happens when expectations change,” Mirko Mikelic, a senior money manager at ClearArc Capital Inc., said in the article. “When rates rise you’re going to see people exiting ETFs and you’re going to see the Street not trading as much. What happens when everyone tries to exit the theater at once?”
Alternatively, investors can take a look at the newer SPDR Barclays Short Term High Yield Bond ETF (NYSEArca: SJNK) and iShares 0-5 Year High Yield Corporate Bond ETF (NYSEArca: SHYG), which have a duration of 2.11 and 2.18 years, respectively, compared to HYG’s 3.93 duration and JNK’s 4.13 duration.
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 shares of HYG, JNK, HYLD.