SJNK seeks to provide investment results that correspond generally to the price and yield performance of the Bloomberg Barclays US High Yield 350mn Cash Pay 0-5 Yr 2% Capped Index. SJNK invests its total assets in the securities comprising the index, which is designed to measure the performance of short-term publicly issued U.S. dollar-denominated high yield corporate bonds. The short-term maturities will help hedge some credit risk due to the lesser exposure, but holdings are still less than investment-grade.
Netflix is Watching Rising Rates
As subscribers tune in to watch Netflix, the video streaming company is watching a healthy dose of interest rate episodes as some analysts are forecasting that rising interest rates could be a factor that might hamper the company’s future growth.
“Longer term, we expect Netflix will continue to invest and market behind its ramping global original programming and we raise long-term marketing expenses [as a percent]of revenues by ~100 (basis points versus our) prior forecast,” Morgan Stanley analyst Benjamin Swinburne said in a note. “We also raise the incremental cost of debt based on rising interest rates, with Netflix still needing to raise an additional ~$5 (billion) of debt over the next two years before reaching positive free cash flow in 2021.”
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Treasury note yields were partly to blame for October’s deep stock sell-off as benchmark notes went on a weeklong ascent, pushing to new highs that caused investors to fret. The rising yield contagion eventually made its way to the stock market, hurting several tech giants like Netflix.
Rising rates are not the only thing Netflix has to worry about with respect to future growth as more competitors enter the video streaming market segment, such as Apple, AT&T, Walmart and Costco.
“While these services offer varying levels of direct threats to Netflix’s subscriber base, they indicate that the arms race for content is not likely to ease any time soon,” said Nomura’s Mark Kelley.
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