Investors who are looking for some extra income in a stubbornly low rate environment can turn to high-yield junk bond ETFs.
“The high yield space continues to offer investors yield, as rates continue to fall,” Luke Oliver, DWS Managing Director, Head of Index Investing, Americas, told ETF Trends.
DWS Xtrackers has a suite of high-yield ETFs to help investors gain targeted exposure to varying speculative-rated, high-yield bonds.
For instance, DWS has come out with the Xtrackers High Beta High Yield Bond ETF (NYSEArca: HYUP) and Xtrackers Low Beta High Yield Bond ETF (NYSEArca: HYDW) to help investors reduce or increase the risk they are comfortable within the high-yield segment. HYUP showed a 6.79% 12-month yield, and HYDW had a 4.49% 12-month yield.
HYUP offers investors access to speculative-grade higher beta bonds, while HYDW provides access to lower beta bonds. Beta is a measure of a security’s sensitivity or volatility and reflects the rate of change in a security’s price that results from overall market moves. Higher yielding securities also tend to exhibit higher beta.
The Xtrackers Factor
Specifically, the Xtrackers High Beta High Yield Bond ETF tries to reflect the performance of the Solactive USD High Yield Corporates Total Market High Beta Index, which includes the high-yield corporate bond market that exhibits higher overall beta to the broader high yield corporate bond market.
Meanwhile, the Xtrackers Low Beta High Yield Bond ETF tries to reflect the performance of the Solactive USD High Yield Corporates Total Market Low Beta Index, which includes junk-rated debt that exhibits lower overall beta to the broader high-yield bond market. Consequently, the portfolio is comprised of lower-yielding junk bonds that show a lower beta.
The two ETFs combined would mirror the portfolio of the broader Xtrackers USD High Yield Corporate Bond ETF (HYLB). HYLB came with a 5.8% 12-month yield.
Furthermore, for those more concerned about interest rate risk, the Xtrackers Short Duration High Yield Bond ETF (NYSEArca: SHYL) goes down the yield curve to cover the speculative-grade debt with shorter durations or lower sensitivities to changes in interest rates. SHYL had a 5.79% 12-month yield.
For more information on the fixed-income space, visit our bond ETFs category.