Given the increased buying pressure, Eurozone bond yields fall further and prices rise. While there are no Europe-focused speculative-grade debt ETFs on the market, U.S. investors can still gain exposure to European markets through international investment-grade bond ETFs with heavy tilts toward these countries.
For example, the PowerShares International Corporate Bond Portfolio (NYSEArca: PICB) holds 23.1% U.K., 18.8 France, 8.9% Germany, 6.9% Italy, 6.2% Netherlands, 4.7% Spain, 3.5% Switzerland and 2.7% Sweden. PICB has a 6.48 year duration and a 1.37% 30-day SEC yield.
The SPDR Barclays International Corporate Bond ETF (NYSEArca: IBND) includes 15.0% France, 12.6% U.K., 10.9% Germany, 7.7% Netherlands, 7.2% Italy, 5.3% Spain, 5.0% Switzerland, 3.0% Sweden, 2.2% Belgium, 0.6% Denmark, 0.6% Norway and 0.2% Portugal. The fund also includes a hefty 24.1% tilt toward the U.S.
However, potential investors should be aware that the ECB previously stated bank bands will not be eligible for the corporate bond purchasing program, including any company regulated by the ECB’s single supervisory mechanism and any company with a non-Eurozone parent regulated as a bank. PICB and IBND both include heavy 50% exposure financial sector.
Additionally, the ECB’s expanded quantitative easing program may act as a rising tide that lifts all boats. With yields falling, Eurozone investors could look to riskier speculative-grade debt to generate greater yields, bolstering the high-yield market. U.S. investors can gain exposure to European junk-rated corporate debt through international ETF options as well.
For instance, the VanEck Vectors International High Yield Bond ETF (NYSEArca: IHY) includes 15.6% exposure to U.K., 9.0% Italy, 6.0% Germany, 6.7% France, 3.8% Luxembourg, 2.4% Spain, 1.4% Liechtenstein, 1.4% Switzerland and 1.9% Netherlands. IHY has a 3.81 year duration and a 5.80% 30-day SEC yield.
The SPDR Barclays International High Yield Bond ETF (NYSEArca: IJNK) top European country weights include U.K. 16.5%, Italy 13.6%, France 9.9%, Germany 8.9%, Luxembourg 8.3% and Netherlands 4.1%. IJNK has a 4.11 year duration and a 5.24% 30-day SEC yield.
The iShares International High Yield Bond ETF (NYSEArca: HYXU) includes Italy 22.5%, Germany 13.6%, U.K. 15.9%, France 9.8%, Luxembourg 5.3% and Spain 5.2%. HYXU has a 3.56 year duration and a 3.85% 30-day SEC yield.
For more information on the fixed-income market, visit our bond ETFs category.