With Stocks Down and Yields Low, Is it Time to Buy Junk Bonds? (JNK, HYG)
At a glance you can plainly see if the ocean is at high tide or low tide, and yet it’s virtually impossible to detect exactly when the tide is changing until long after it has actually happened. In much the same manner, the junk bond market looks to be undergoing a major tide change of its own, having just snapped a six-month string of withdrawals. If the tide has actually turned, then the $1.2 billion of new money that poured into high yield funds last week could be the start of a bigger trend.
“The spread over treasuries is very enticing for many investors, including pension funds,” says Bob Levine, author of How To Make Money With Junk Bonds. “It’s a legitimate asset class that one ought to look at.”
Clearly not for the faint of heart, high yield bonds, funds, and ETFs, such as the SPDR High Yield Bondj etf (NYSEARCA:JNK) or the iShares High Yield Corporate (NYSEARCA:HYG) are turning heads again. Not because of their volatility, but for the lack of it. Add in the slump in Treasury yields, a nervous stock market, and traditional safe havens like gold that don’t feel so safe, and the planets are clearly aligned for a junk rally.
See the full “Breakout” interview below:
iShares iBoxx $ High Yid Corp Bond ETF (NYSEARCA:HYG)
The iShares iBoxx $ High Yield Corporate Bond Fund (NYSEARCA:HYG) seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the iBoxx $ Liquid High Yield Index, a corporate bond market index compiled by Markit Indices Limited. The iBoxx $ Liquid High Yield Index is a rules based index consisting of liquid U.S. dollar-denominated, high yield corporate bonds for sale in the United States, as determined by the Index Provider. The index is designed to provide a broad representation of the U.S. dollar-denominated high yield corporate bond market. There is no limit to the number of issues in the index.
SPDR Barclays Capital High Yield Bnd ETF (NYSEARCA:JNK)
The SPDR Barclays Capital High Yield Bond ETF (NYSEARCA:JNK) seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of the Barclays Capital High Yield Very Liquid Index (index ticker: LHVLTRUU). The SPDR® Barclays Capital High Yield Bond ETF Fund uses a passive management strategy designed to track the price and yield performance of the Barclays Capital High Yield Very Liquid Index. The High Yield Index measures the performance of publicly issued US dollar denominated high yield corporate bonds with above-average liquidity.