High yield fixed income has always been considered a riskier investment relative to other bonds. But strong corporate fundamentals are making this asset class far less risky these days. And that makes so-called junk bonds currently a bit of a misnomer.
“The stronger fundamental starting point for U.S. high yield remains a clear differentiator this cycle, with average credit quality still near all-time highs,” according to BondBloxx. “Although leverage and interest coverage measures have started to soften during the past two quarters, high yield corporate balance sheets remain generally well-positioned.”
BondBloxx added that “issuers continue to actively address their near-term bond maturities.” This has been “reducing the chance of a significant rise in corporate defaults.”
See more: “With CCCs Yielding 14%, XCCC May Be a Good Bet”
Target These Bonds in Resilient Sectors
For investors looking to invest in high yield industries that have demonstrated strong fundamentals and resilience in the current economic climate, BondBloxx has a few options. For example, they may want to target the energy sector with the BondBloxx USD High Yield Bond Energy Sector ETF (XHYE).
Another option is consumer noncyclicals. That’s there the BondBloxx USD High Yield Bond Consumer Non-Cyclicals Sector ETF (XHYD) can come into play.
And for those looking to target core industrials, the BondBloxx USD High Yield Bond Industrial Sector ETF (XHYI) may be an option.
These ETFs are among a suite of seven sector-specific high yield bond funds that BondBloxx offers investors. These funds offer precise, index-based exposure to this asset class. They’re designed to let investors diversify and manage risk within the industry sector.
BondBloxx offers 20 ETFs (soon to be 21) that span U.S. Treasuries, industry- and credit-rating-specific high yield bonds, and emerging market bonds. The firm exceeded $2 billion in assets under management in early August.
For more news, information, and analysis, visit the Institutional Income Strategies Channel.