With the Fed set to raise rates to a 22-year high, where should investors look? Fixed income is well and truly back this year, and with it come opportunities. That includes areas like high yield, where a smart, experienced team of portfolio managers can thrive. A high yield bond ETF like the WisdomTree U.S. High Yield Corporate Bond Fund (WFHY) offers one route into that space, and was sending a buy signal as of Wednesday.
Higher yield bonds offer some intriguing opportunities for income, always a worthwhile add for portfolios. High yield levels have more than doubled over the last two years, to amounts not seen outside of COVID-related periods since 2016. Yes, investors and advisors may be concerned about a recession increasing the number of defaults a high yield bond ETF would face. With the potential for a soft landing rising, however, some observers have like Goldman Sachs are seeing recession’s likelihood down as low as 20%.
That’s where WFHY comes in. The high yield bond ETF considers default risk and takes a very selective approach in following its index. The strategy screens for quality via WisdomTree Fundamental U.S. High Yield Corporate Bond Index, excluding firms with negative cash flow from the index. Taken together, that’s helped the strategy offer a 7.8% SEC 30-day yield, with an 8.1% average yield to maturity.
High Yield Bond ETF WFHY’s Attributes
WFHY charges a 38 basis point (bps) fee and has returned 1.8% over the last month. WFHY has also risen above $200 million in ETF AUM this year, which indicates broader support for the strategy. The high yield bond ETF’s price has risen above its 200-day Simple Moving Average (SMA) as of Wednesday, as well, sending a key technical buy signal.
Fixed income offers a wide variety of opportunities, but where should investors look? High yield may be one option to consider, with WFHY a standout in the space worth watching in the weeks ahead.
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