To get more yield, fixed income investors typically have to go far out on the yield curve, but with the benchmark 30-year Treasury note hitting lows, high-yield options are available.
One such ETF to consider is the FlexShares High Yield Value-Scored Bond Index Fund (HYGV). With a distribution yield of 5.19%, fixed income investors can extract a higher dose of yield than they can from the 30-year Treasury, which dipped under 2%.
“Bonds rallied from Europe to the U.S., with 30-year Treasury yields falling to the lowest since July, a move that was accelerated by traders unwinding their short bets,” Bloomberg reports.
It wasn’t just in the U.S., but other bond markets around the globe that saw their benchmark government debt yields dip.
“The 30-year U.S. rate fell as much as 9 basis points to 1.79%, narrowing its gap with 5-year yields to 72 basis points, within less than 1 basis point of the lowest since March 2020,” Bloomberg adds. “In Europe, similar-maturity German yields sank 11 basis points, while the equivalent British rate slid about 8 basis points. The 10-year Treasury yield slumped as much as 8 basis points to 1.41%, the lowest since Sept. 24, before paring the decline following a tepid auction.”
Reward Without Too Much Risk
HYGV benefits from a systematic approach that ensures a broadly diversified portfolio with debt maturities ranging primarily between three and 10 years. Sector-wise, debt holdings are mostly concentrated in the industrial, consumer, and energy sectors, with about 85% within the U.S.
Per its fund description, HYGV seeks investment results that generally correspond to the price and yield performance of the Northern Trust High Yield Value-Scored US Corporate Bond Index, which reflects the performance of a broad universe of U.S.-dollar denominated high-yield corporate bonds and seeks a higher total return than the overall high-yield corporate bond market, as represented by the Northern Trust High Yield US Corporate Bond Index.
That risk management component with a focus on value can help reticent investors who want to add high yield to their portfolio but are a little more risk-averse. HYGV gives these fixed income investors a little more peace of mind while still keeping fees low at a 0.37% expense ratio, which falls below the category average.
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