A Good Time to Revisit Junk ETFs

For instance, the Market Vectors Fallen Angel High Yield Bond ETF (NYSEArca: ANGL) tracks so-called fallen angel, speculative-grade debt, or those bonds that were born with investment-grade ratings but were later downgraded to junk territory. Fallen angel issuers tend to be larger and more established than many other junk bond issuers. Furthermore, since these fallen angels were formerly on the cusp of investment-grade status, this group of junk bonds typically has a higher average credit quality than many other speculative-grade debt-related funds.

“When junk-bond prices fall, they have a hard time stopping at fair value. For example, if large amounts of BBB bonds (those rated just above junk and themselves nearly twice the size of the entire junk-bond market) start getting downgraded, the size of the junk-bond market can increase dramatically just as the appetite for them is declining,” adds MarketWatch.

iShares iBoxx $ High Yield Corporate Bond ETF

Tom Lydon’s clients own shares of HYG and JNK.