Junk Bond ETFs can Deliver in 2017

“This year, thanks to conspicuous uncertainties about the political and economic outlook, sell-side strategists are not clustered around the customary coupon-clipping-year forecast. JPMorgan predicts a high-yield return of 10–12%, while Morgan Stanley’s forecast is –2.7%. BNP Paribas foresees “pedestrian single-digit carry-type returns,” which sounds like a coupon-clipping year but is not based on an assumption that rates and spreads will be stationary,” according to a Lehmann Livian Fridson Advisors note posted by Amey Stone of Barron’s.

Last week, Deutsche Asset Management introduced the Deutsche X-trackers USD High Yield Corporate Bond ETF (NYSEArca: HYLB). HYLB, the latest entrant into the U.S. junk bond arena, is also the least expensive with a 0.25% net expense ratio.

HYLB will try to reflect the performance of the newly launched Solactive USD High Yield Corporate Total Market Index, a market value weighted benchmark designed to mirror the performance of high yield corporate bonds issued in U.S. dollars.

For more information on the credit market, visit our corporate bonds category.

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