Strong Demand for Netflix Bonds Spurs Low Yield Offering

With social distancing restrictions in effect, Netflix was able to capitalize on stay-at-home culture with 15.8 million subscribers by the end of March. The company issued $1 billion in dollar-denominated and euro bonds, which was met with record demand.

Per a Bloomberg report, demand was at such a high level “with orders at about ten times the offering size, that Netflix was able to reduce yields on both portions on Thursday from earlier discussions, according to people familiar with the matter. It sold $500 million of bonds at a 3.625% yield, among the lowest ever seen in the U.S. high-yield bond market and in line with prices typically offered on investment-grade bonds. The 470 million euro ($507 million) portion priced at 3%.”

The video streaming company might be cash-strapped now with no positive cash flow just yet, but it makes sense to issue bonds at the present time while global yields are at record lows.

“Given the outlook for many high-yield issuers is so uncertain in response to the pandemic, Netflix may offer a much higher level of certainty in future performance given its business model,” said Bloomberg Intelligence analyst Stephen Flynn.

According to Flynn, Netflix’s revenue model “is well-situated for a social-distanced environment” as the company can borrow money at the current cheap rates.

One of the exchange-traded funds (ETFs) investors can use for Netflix exposure is Invesco NASDAQ Internet ETF (NASDAQ: PNQI). The fund seeks to track the investment results (before fees and expenses) of the NASDAQ Internet IndexSM. The fund generally will invest at least 90% of its total assets in securities that comprise the underlying index. The underlying index is designed to track the performance of the largest and most liquid U.S.-listed companies engaged in Internet-related businesses that are listed on one of the three major U.S. stock exchanges.

High Yield Bond ETF Options

Investors looking to add high yield bond exposure to their ETF portfolios can look at the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) and the SPDR Bloomberg Barclays High Yield Bond ETF (JNK). Some market experts question whether this move is nothing more than a small bandage on a gunshot wound.

Investors contemplating a high yield option can take a look at the Goldman Sachs Access High Yield Corporate Bond ETF (GHYB). GHYB seeks to provide investment results that closely correspond, before fees and expenses, to the performance of the FTSE Goldman Sachs High Yield Corporate Bond Index.

The fund seeks to achieve its investment objective by investing at least 80% of its assets (exclusive of collateral held from securities lending) in securities included in its underlying index. The index is a rules-based index that is designed to measure the performance of high yield corporate bonds denominated in U.S. dollars that meet certain liquidity and fundamental screening criteria.

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