With fixed income investors scrambling to reduce interest rate risk, some short-term bond funds are receiving renewed attention. Among high-yield ETFs, that conversation should include the SPDR Barclays Short Term High Yield Bond ETF (NYSEArca: SJNK).
The $3.58 billion SJNK debuted over six years ago and follows the Bloomberg Barclays US High Yield 350mn Cash Pay 0-5 Yr 2% Capped Index. SJNK is an alternative to consider if rates rise because SJNK offers income investors a lower duration avenue to high-yield corporates without a significant sacrifice in terms of yield.
SJNK “seeks to provide diversified exposure to short-term US dollar-denominated high yield corporate bonds and potentially presents less interest rate risk than high yield bonds with longer duration,” according to State Street Global Advisors (SSgA).
Important SJNK Details
SJNK is the shorter term equivalent of the popular SPDR Blmbg Barclays High Yield Bd ETF (NYSEArca: JNK), the second-largest high-yield bond ETF by assets.
In a rising interest rate environment, JNK can cushion the impact should the Federal Reserve continue to be hawkish on the economy if the latest data warrants more short-term interest rate spikes. In addition, a growing economy could signal less default rates for company debt included in the Bloomberg Barclays VLI.
Related: An ETF of ETFs to Trim Interest Rate Risk
For its part, SJNK has been a decent performer this year, losing just half a percent in a challenging environment for high-yield corporate debt. SJNK’s option-adjusted duration is just 2.44 years and its yield to maturity is 6.54%.
While SJNK reduces some of the interest rate risk associated with traditional junk bond funds, the ETF does not skimp on yield. As of July 17th, SJNK had a 30-day SEC yield of 5.95%, according to issuer data.
Over 81% of SJNK’s holdings are rated BB or B. However, the ETF also devotes just over 17% of its weight to bonds rated or CCC or worse. Those are highly speculative ratings and those bonds, while they carry higher yields, can add some volatility as well.
For more information on the fixed-income space, visit our bond ETFs category.