If Rates Rise, Look to These Junk Bond ETFs

The S&P’s findings mirror Moody’s expectations that corporate defaults could hit its highest rate since the financial crisis, led by the energy and mining sectors.

Related: ETF Investors Grow Wary of Junk Bond Rally

Even before news of a possible June rate hike became a point of emphasis high-yield debt defaults were rising. Oil, gas and mining companies make up the majority of defaults this year as commodity prices weakened over the past year. Diane Vazza, S&P’s head of fixed income research, found that 14 of the 40 defaults have come out of the oil and gas sector this year and eight from the metals, mining and steel sector.

SJNK’s “risk levels of the Short Term High Yield Bond ETF are lower using every measure. Modified adjusted duration is 45% lower. Beta is 44% lower. 3-year standard deviation of returns is 25% lower. While none of these is a perfect measure in and of itself, it shows that one fund is clearly less risky than the other,” adds Seeking Alpha.

For more information on the Junk Bonds sector, visit our Junk Bonds category.

SPDR Barclays Short Term High Yield Bond ETF