Even though April was a noticeably tough month for high yield bond investing, bonds rated CCC are continuing to prove to be valuable investment choices.
Research from BondBloxx noted that, despite bonds rated CCC struggling along with the rest of the fixed income sphere in April, CCC’s are still outperforming the rest of the high yield market on year-to-date returns. Even in April, CCCbonds rated CCC had total year-to-date returns of 1.3%.
The BondBloxx data comes as the ICE CCC US Cash Pay High Yield Constrained Index has an elevated yield close to 12% as of May 21, 2024. This opens up further opportunities for investors to capture high potential income.
BondBloxx’s CCC-rated bond ETF, the BondBloxx CCC-Rated USD High Yield Corporate Bond ETF (XCCC), can provide access to the robust benefits within CCC-rated bond investing. The fund aims to produce similar results to the ICE CCC US Cash Pay High Yield Constrained Index.
To do so, the fund invests in bonds rated between CCC1 and CCC3. These ratings are based on an average of Moody’s, S&P, and Fitch ratings. To help overexposure risk, issuer exposure is capped at 2%.
Looking within XCCC’s portfolio, the majority of held assets have maturities of an intermediate duration. However, nearly a quarter of the fund’s investments are in bonds with short duration maturities.
In managing the fund’s assets, XCCC uses a representative sampling indexing strategy. The fund does not aim to outperform the index, and will not shift to defensive positions during market downturns.
Proven Results
Despite some investor pullback in April, fund flows are continuing to highlight investor interest in the fund. XCCC has seen nearly $2 million in net flows within the last week, contributing to total net flows of more than $43 million over the last 12 months.
XCCC’s returns are demonstrating why investors are continuing to support the fund. As of May 21, 2024, the fund had a yield-to-maturity rate of 12.42%. FactSet data noted that XCCC is currently up more than 14% over the last 12 months.
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