The ultra-low default rates have helped attract greater investment interest in the junk bond market that yields an average 5.2%. The benchmark Bank of America Merrill Lynch Index has gained 3.3% so far this year. [A Revival in Corporate Bonds, ETFs]
The iShares iBoxx $ High Yield Corporate Bond ETF (NYSEArca: HYG) and SPDR Barclays High Yield Bond ETF (NYSEArca: JNK), the two largest junk-bond related ETFs, have gained 2.9% and 3.2% year-to-date, respectively.
HYG has a 4.48% 30-day SEC yield. The ETF has a small 6.6% allocation to BBB-rated, low investment grade quality bonds. The rest of its portfolio is allocated to speculative grade BB 45.9%, B 26.5%, CCC 10.7%, not rated 3.1% and other securities 6.9%.
JNK has a 4.81% 30-day SEC yield. The fund includes a lower 0.9% weight toward investment grade BBB-rated bonds, along with BB 38.8%, B 41.3% and CCC or lower 19.0%.
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 and JNK.