Riskier Bond ETFs Are Back in Play

“We talk to hundreds of companies and nothing we were hearing led us to believe we were going to have a recession,” Notkin told Bloomberg. “Things aren’t terrific but the fundamentals are OK.”

Fixed-income ETF investors who are seeking to shift into riskier debt opportunities have a number of options to choose from. For instance, the iShares iBoxx $ Investment Grade Corporate Bond ETF (NYSEArca: LQD), Vanguard Intermediate-Term Corporate Bond ETF (NYSEArca: VCIT), SPDR Barclays Intermediate Term Corporate Bond ETF (NYSEArca: ITR) and PIMCO Investment Grade Corporate Bond Index ETF (NYSEArca: CORP) provide access to a broad diversified grouping of investment-grade corporate debt.

Bond investors interested in riskier investments with the promise of higher yields can turn to speculative-grade or junk bond ETFs like the PIMCO 0-5 Year High Yield Corporate Bond Index (NYSEArca: HYS), PowerShares Fundamental High Yield Corporate Bond ETF (NYSEArca: PHB), SPDR Barclays High Yield Bond ETF (NYSEArca: JNK) and iShares iBoxx $ High Yield Corporate Bond ETF (NYSEArca: HYG).

Additionally, there are a handful of high-yield, senior bank loan-related ETF options, including the passive index-based PowerShares Senior Loan Portfolio (NYSEArca: BKLN) and Highland/iBoxx Senior Loan ETF (NYSEArca: SNLN). There are also two actively managed options, including the SPDR Blackstone/GSO Senior Loan ETF (NYSEArca: SRLN) and First Trust Senior Loan ETF (NasdaqGM: FTSL).

Since the senior loans have rates that adjust periodically, the floating-rate loans offer investors an alternative method of earning yields with little or no interest-rate risk. Due to their floating rate component, bank loans are seen as an attractive alternative to traditional corporate bonds in a rising rate environment.