Appetite For U.S. High Yield Bond ETFs Remains High as Yields Tighten

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May 11, 2011 1:26pm NYSE:MBB NYSE:MUB

High yield bond ETFs concentrate on lower quality corporate bonds, which are considered riskier than higher-quality or more established companies. Because of this higher level of risk, high-yield

 bonds, also known as junk bonds, offer higher yields to investors. US high yield bond ETFs invest at least 65% of capital in binds that are not rated or are rated by S&P or Moody’s at or below BB (considered speculative). Because of high returns and the potential for diversification across many markets, regions, and industries, high yield bonds are a major part of many investment strategies.

We track asset class movement and you can see here the fixed income table which is updated weekly.
Assets Class Symbols 05/06
International Inflation Protected (WIP) 6.74% 9.22% v
High Yield (JNK) 5.54% 5.68% v
International Treasury (BWX) 5.1% 6.82% v
Long Term Credit (LQD) 3.48% 2.87% ^
Emerging Mkt Bonds (PCY) 3.48% 2.21% ^
20+ Year Treasury (TLT) 3.38% 1.63% ^
Inflation Protected (TIP) 3.09% 3.27% v
10-20Year Treasury (TLH) 2.88% 1.73% ^
Intermediate Term Credit (CIU) 2.43% 2.06% ^
Intermediate Treasury (IEF) 2.39% 1.65% ^
US Total Bond (BND) 2.1% 1.77% ^
MBS Bond (MBB) 1.92% 1.83% ^
California Muni (CMF) 1.74% 1.99% v
National Muni (MUB) 1.57% 1.24% ^
Short Term Credit (CSJ) 1.0% 1.09% v
New York Muni (NYF) 0.64% 0.51% ^
Short Term Treasury (SHY) 0.55% 0.53% ^
Treasury Bills (SHV) 0.08% 0.07% ^

Trend score is the average of 1,4,13,26 and 52 week total returns (including dividend reinvested). You can get a no cost widget  for any of these tables which will automatically update weekly.

At the end of last week (5/6/2011), high yield bond ETFs, represented by the SPDR Barclays Capital High Yield (NYSE:JNK), stood among the top of the Fixed Income Return Table. Yields in the sector have declined as risk premiums have tightend on stronger performance by companies with lower credit ratings. While returns on corporate bonds have declined slightly in recent periods, ETFs that track the market have continually offered strong returns relative to other fixed income securities.

U.S. High Yield Bonds


Description Symbol 1 Yr 3 Yr 5 Yr Avg. Volume(K) 1 Yr Sharpe
iShares iBoxx $ High Yield Corp (HYG) 17.67% 7.03% NA 1,247 270.24%
SPDR Barclays Capital High Yield (JNK) 20.83% 8.41% NA 2,972 279.79%
PowerShares Fundamental High Yield (PHB) 19.2% 0.79% NA 302 318.25%
Among US High Yield Bond ETFs, the top performers include the SPDR Barclays Capital High Yield (NYSE:JNK), the Powershares Fundamental High Yield ETF (NYSE:PHB), and the iShares iBoxx $ High Yield Corporate ETF (NYSE:HYG) returning 20.83%, 19.20%, 17.67% respectively in the past year.
With the highest one-year return and the highest trading volume, the SPDR Barclays Capital High Yield ETF remains a srtong investment option. The ETF is well diversified, with no single bond comprising more than 4% of total assets and the top 10% of assets making up only 22.58% of the total.
Going forward, yields on high yield corporate debt should continue to tighten as long as companies continue to generate strong performance. Still, high yield corporate bond ETFs should continue to offer attractive returns relative to other fixed income assets.
Corporate bonds are an important component of diversified bond portfolios, as they offer greater returns and risks than government bonds. Due to their high level of interest paid, generally in the form of monthly distributions, corporate bond ETFs may be especially suitable for individuals approaching or already in retirement. As with any investment, it is important to make sure the risk and return levels match up with your personal investment goals. 

Disclaimer: MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical.

LTI Systems, Inc. is the operator of and The founders of LTI Systems have extensive technology and business background in computer and semiconductor industries. They have been using the strategies provided by MyPlanIQ for their own personal retirement and taxable investments. The mission of LTI Systems is to make wealth management investment strategies that are used to be only accessible to institutions and high net worth individuals available to private investors with a fraction of flat cost and ease of use. The founders of LTI Systems, investors themselves, take pride in creating such a system and service for investors by taking the perspective from the investor side. They are using the system and the strategies for their own investment and align their interests with their customers.  

MyPlanIQ’s blog provides periodical articles to discuss issues related to retirement plans (401(k), 403(b) and IRAs), deferred compensation plans (457), college savings plans (529), taxable brokerage investment accounts, variable annuities and universal life insurance plans. It also covers investment strategies, specifically strategic and tactical asset allocation and investment products such as ETFs and mutual funds. In addition, it syndicates daily articles that are related to retirement planning, personal finance, investment strategies, annuities, insurance, college savings and market/economic outlooks. It provides a comment and discussion community for readers.

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