“Rising U.S. rates and accelerating economic growth is bullish for the dollar. We expect the dollar to strengthen against the Australian dollar, British pound and euro over the next 12 months. As the credits in SJNK are denominated in USD, they will not be directly impacted by the strength of the dollar,” he said.
SJNK holds 506 bonds, over 77% of which are rated BB or B. SJNK also offers investors a liquidity advantage, a trait that should not be underestimated when considering that liquidity is usually on the tips of critics’ tongues when question junk bond ETFs.
“Given the recent market volatility, liquid exposure is a must. SJNK tracks an index that is focused on exposure to the more liquid segments of the short term high yield market, holding issues with more than $350M of face amount outstanding and maturities of less than 5 years,” said Mazza.
Mazza adds that there is also a highly liquid secondary market for the bonds found in SJNK and that that liquidity can actually increase even as volatility rises. SJNK’s holdings’ “ratio of secondary market volume to primary market volume during the volatile month of September was 2.7x, which is higher than the since inception average,” he said.
SPDR Barclays Short Term High Yield Bond ETF
Tom Lydon’s clients own shares of HYG and JNK.