High yield bonds rated CCC are continuing to bring in strong results.
Recent insight from BondBloxx noted that high yield bonds brought in a positive performance in March, led by junk bonds rated BB and CCC. With stable economic data for March in mind, BondBloxx asserted high yield investments can provide strong income and return potential.
“The CCC rating category continues to significantly outperform the rest of the U.S. high yield market over the past 3, 6 and 12-month time periods, including a return of 17.7% for the last twelve months versus 11.0% for the US High Yield Index. CCC’s outperformed other broad market fixed income indices by an even larger margin over the past 12 months, including the US Corporate Index return of 4.4% and the US Aggregate Index return of 1.7%,” BondBloxx added.
To capitalize on the high potential of junk bonds rated CCC, investors could consider the BondBloxx CCC-Rated USD High Yield Corporate Bond ETF (NYSE Arca: XCCC). The fund is benchmarked to the ICE CCC US Cash Pay High Yield Constrained Index. Thusly, the fund invests primarily in junk bonds with a rating between CCC1 and CCC3.
Limited Exposure
Due to their risk of default, bonds rated CCC can be considered a risky bet. However, XCCC mitigates some of the potential risk by capping issuer exposure at about 2%.
About 70% of XCCC holdings have a maturity between three and seven years. This coincides with BondBloxx’s current assertion that intermediate-duration bond exposure can provide good potential returns. The fund currently has a yield to maturity of 12.45%.
The fund has a net expense ratio of 0.40%. XCCC has seen monthly net flows of over $11 million, signaling interest in high yield assets. In total, the fund has over $59 million in assets under management.
Using extensive experience in the fixed income market, BondBloxx operates a number of high yield bond ETFs. The issuer’s ETF, which tracks bonds rated BB, the BondBloxx BB-Rated USD High Yield Corporate Bond ETF (NYSE Arca: XBB), holds over $58 million in AUM.
For more news, information, and strategy, visit the Institutional Income Strategies Channel.