Despite concerns about the economy and companies’ ability to repay their debt obligations, high-yield junk bond exchange traded funds are attracting more attention after the recent selling pressure pushed up yields and dissipating volatility helped drive investors back into riskier assets.
So far this month, the iShares iBoxx $ High Yield Corporate Bond ETF (NYSEArca: HYG) brought in $1.2 billion in net inflows and the SPDR Barclays High Yield Bond ETF (NYSEArca: JNK) saw $1.8 billion in inflows, according to ETF.com.
Since the October 1 low, HYG gained 3.9% and JNK rose 3.3%. Both funds are now trading back above their short-term, 50-day simple moving averages.
Yields on junk bonds have soared above 8% in October for the first time since 2012 as investors ditched speculative-grade debt on fears of weaker growth hitting highly indebted companies, notably in the materials and energy sectors, reports Eric Platt for the Financial Times.
HYG now offers a 6.69% 30-day SEC yield while JNK has a 6.80% 30-day SEC yield.
Yields have been rising after months of selling pressure ahead of speculated Federal Reserve interest rate hike. More observers, though, anticipate the Fed to push off on a rate hike due to ongoing global economic troubles.
Junk bond sales are down 9% in 2015 year-over-year. Meanwhile, investors have yanked $14.3 billion from junk-related mutual funds and ETFs since the middle of April, according to Lipper data, which have subsequently pushed up yields on the riskiest rated companies to 14%, according to Bank of America Merrill Lynch.