High-Yield U.S. Bonds Back in Play?
In the United States bond market, a need for high-yielding assets could be spurred should a year-end rally occur in U.S. equities. Even though both the stock and bond markets march to the beat of their down drum, a risk-on sentiment could fuel either asset class if a U.S.-China trade deal comes into fruition.
To satiate an appetite for high yield, investors can look to fixed-income exchange-traded funds (ETFs) like the iShares iBoxx $ High Yield Corporate Bond ETF (NYSEArca: HYG), ProShares High Yield—Interest Rate Hedged (BATS: HYHG) and WisdomTree Interest Rate Hedged High Yield Bond ETF (NasdaqGM: HYZD).
HYG tracks the investment results of the Markit iBoxx® USD Liquid High Yield Index, which is comprised of high yield U.S. corporate bonds that have less than investment-grade quality. HYHG tracks the performance of the Citi High Yield Index and allocates 80% of its total assets in high-yield bonds and short positions in Treasury Securities in order hedge against rising rates HYZD seeks to track the price and yield performance of the BofA Merrill Lynch 0-5 Year U.S. High Yield Constrained, Zero Duration Index, which provides long exposure to the BofA Merrill Lynch 0-5 Year U.S. High Yield Constrained Index while seeking to manage interest rate risk through the use of short positions in U.S. Treasury securities.
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