One of this week’s hot topics, and rightfully so, is where high-yield bond exchange traded funds go from here.
Investors are pulling out of once beloved junk bond ETFs, such as the iShares iBoxx $ High Yield Corporate Bond ETF (NYSEArca: HYG) and the SPDR Barclays High Yield Bond ETF (NYSEArca: JNK), and doing so at a rapid pace, heightening fears about what could happen if everyone heads for the same, small exit at the same time. [Volatility Weighs on Junk Bond ETFs]
Those tensions are providing a lift for the oft-overlooked ProShares Short High Yield ETF (NYSEArca: SJB), an inverse but not leveraged play on the Markit iBoxx $ Liquid High Yield Index. Last week, investors pulled nearly $835 million from HYG and $274.3 million from JNK. HYG, the largest high-yield bond ETF, has lost $3.5 billion year-to-date. Only the SPDR S&P 500 ETF (NYSEArca: SPY), which has recently solid inflows, has lost more assets this year than HYG. [S&P 500 ETFs Gain Cash]
Last month, HYG and JNK lost over $2.2 billion combined, exacerbating concerns about the fast and furious departure from junk bond funds.
“There’s been quite a bit of jitters of late thanks to huge, sudden outflows from the funds that play there. This week there will be more people watching junk than during the series finale of Sanford & Son back in ’77,” notes Josh Brown on The Reformed Broker.
SJB is not the largest inverse on the market. It is not even the first destination many traders seek when looking to short junk bonds via ETFs. That honor usually goes to JNK because it is somewhat loose to its underlying index.