An influx of capital into safe haven government bonds have put a strain on Treasury yields, causing investors to search the every corner of the bond market for that seemingly elusive yield. However, there are still high yield bond exchange-traded funds (ETFs) that are providing fixed income investors with the yield they desire.

“Bond market analysts have noted that short-term Treasury yields have fallen below longer term yields this year, an infrequent phenomenon known as a yield curve inversion that usually foreshadows a recession,” wrote Marvin Appel, President of Signalert Asset Management LLC. “In particular, three-month Treasury bill yields have been below 10-year yields since May. More recently, two-year Treasury note yields dipped below 10-year yields in August for the first time since 2007. Yield curve inversions have preceded every recession in the past 50 years and have inverted only once without a subsequent recession. For this reason, investors and policy makers are taking this bond market signal seriously.”

With the extended bull run raging on, it’s been a boon for high yield fixed income investors where a risk-on environment has been fueling gains within the riskier bond classes. However, with rate cuts by the Federal Reserve and fears of a global economic slowdown looming, the high yield party just may be starting to wind down.

Even domestically, the market may start losing steam despite a generally strong labor market with a low unemployment rate.

With the high yield market getting more risky, it’s necessary for investors to shed some of that risk and get more strategic with their capital allocation. This could mean looking to options like investment-grade debt for higher yielding income sources.

After investors got washed through the May volatility cycle thanks to trade wars, that may have tamped down their risk-on sentiment and this is where a potential buying opportunity exists for investment-grade debt. As a result, high yield has underperformed lately as investors flocked to the safer confines of quality oriented assets like investment-grade debt issues.

Investment-grade corporate bond-focused fixed-income ETF options include the iShares Intermediate Credit Bond ETF (NASDAQ: CIU)iShares iBoxx $ Invmt Grade Corp Bd ETF (NYSEArca: LQD) and Vanguard Interm-Term Corp Bd ETF (NASDAQ: VCIT).

However, for investors who want pure yield, here are the 10 best-performing ETFs so far in 2019:

SymbolETF NameYTD
BSJQInvesco BulletShares 2026 High Yield Corporate Bond ETF14.38%
FALNiShares U.S. Fallen Angels USD Bond ETF14.21%
ANGLVanEck Vectors Fallen Angel High Yield Bond ETF14.19%
BSJPInvesco BulletShares 2025 High Yield Corporate Bond ETF13.84%
FDHYFidelity High Yield Factor ETF13.48%
HYDBiShares Edge High Yield Defensive Bond ETF13.44%
JNKSPDR Barclays High Yield Bond ETF13.31%
PHYLPGIM Active High Yield Bond ETF13.02%
HYUPdb x-trackers High Beta High Yield Bond ETF12.89%
WFHYWisdomTree Fundamental U.S. High Yield Corporate Bond Fund12.87%


For more trends in fixed income, visit the Fixed Income Channel.