High Yield ETFs See Inflows After Inflation Report

The recent consumer price index report has made investors more risk-on when it comes to high yield fixed income ETFs. After months of outflows, 47 different so-called junk bonds brought in $12 billion of investor capital in October.

“Investors are assuming that the worst is over when it comes to Fed hikes,” said Eric Balchunas, senior ETF analyst at Bloomberg. “People feel like it’s safe to come out again.”

The latest CPI report showed that consumer prices rose 0.4% for the month and 7.7% for the 12 months ending October 31, lower than Wall Street estimates. The Fed raised the target range for the federal funds rate by 75 basis points this month, marking the sixth consecutive rate hike and the fourth increase of 0.75%.

The FOMC will meet on December 13–14. Analysts expect the U.S. central bank will approve another rate hike, but this time it is expected to be an increase of 50 basis points rather than another 0.75% raise.

Balchunas added that another reason investors are returning to high yield ETFs is because they’re currently yielding an average of 8%. “These used to yield half that,” he said.

Launched in October of 2021 to provide precision ETF exposure for fixed income investors, BondBloxx Investment Management was co-founded by ETF industry leaders Leland Clemons, Joanna Gallegos, Tony Kelly, Mark Miller, Brian O’Donnell, and Elya Schwartzman. The team has collectively built and launched over 350 ETFs at firms including BlackRock, JPMorgan, State Street, Northern Trust, and HSBC.

“Our conversations with investors have reinforced what we already knew – there is significant demand for more targeted fixed income products,” said Kelly. “Our initial product suites aim to create a full toolkit for high-yield investors looking to implement their specific views on the market, and we anticipate extending this approach to other fixed income asset classes.”

Since February, BondBloxx has launched 19 fixed income ETFs, including seven industry sector-specific high-yield bond ETFsthree ratings-specific high-yield bond ETFseight target-duration U.S. Treasury ETFs, and one short-duration emerging market bond ETF.

“BondBloxx has continued to launch innovative products since its founding and has expanded the ETF universe with targeted products where there is white space,” said Todd Rosenbluth, head of research at VettaFi. “Their broad range of fixed income funds makes them a firm to watch as the asset category grows.”

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