As equities markets bounce back and oil prices edge higher from a 13-year low, the rising risk-on sentiment has brought fixed-income investors back to the high-yield bond exchange traded funds.
Over the past week, the SPDR Barclays High Yield Bond ETF (NYSEArca: JNK) attracted $340.2 million in net inflows, iShares iBoxx $ High Yield Corporate Bond ETF (NYSEArca: HYG) added $945.4 million and iShares iBoxx $ Investment Grade Corporate Bond ETF (NYSEArca: LQD) saw $387.5 million in inflows, according to ETF.com.
After underperforming government bonds during the risk-off environment, corporate debt is finally starting to outpace Treasuries. Over the past week, HYG rose 1.1%, JNK gained 1.3% and LQD increased 1.3%, whereas the iShares 3-7 Year Treasury Bond ETF (NYSEArca: IEI) was up 0.2%.
Investors may have been attracted to the cheap valuations and wider yield premiums that more speculative-grade debt offers over safe-haven government bonds after benchmark yields on 10-year Treasuries dipped toward all-time lows.
The BofA Merrill Lynch US High Yield Index shows a 8.17% yield, whereas 10-year Treasury notes have a 1.711% yield. Looking at the ETF options, JNK has a 4.29 year duration and a 8.06% 30-day SEC yield. HYG has a 4.0 year duration and a 9.01% 30-day SEC yield. IEI has a 4.0 year duration and a 1.06% 30-day SEC yield.