How ‘Frothy’ are High-Yield Bond ETFs?

ETF Trends

High-yield corporate bond ETFs are bouncing back after a rare three-day sell-off. Some investors are worried junk bond ETFs are overheated after such a strong run but they have endured the recent bump higher in Treasury yields quite well.

Junk debt ETFs slipped after Federal Reserve Chairman Ben Bernanke last week warned investors on the risks of stretching for yield in a low-rate market for bonds. [Junk Bond ETFs Lower After Bernanke Warns on ‘Reaching for Yield’]

The pullback triggered some outflows from the two largest junk bond ETFs. In the past week, investors have pulled $343.4 million from iShares iBoxx High Yield Corporate Bond (HYG) and $291 million from SPDR Barclays High Yield Bond (JNK), according to data from IndexUniverse. [High-Yield Bond ETFs Fall Amid Outflows]

HYG holds total assets of $15.9 billion while JNK holds $11.4 billion.

Other ETFs for the asset class include PIMCO 0-5 Year High Yield Corporate Bond Index Fund (HYS), PowerShares High Yield Corporate Bond Portfolio (PHB), SPDR Barclays Capital Short Term High Yield Bond (SJNK), Peritus High Yield ETF (HYLD) and First Trust High Yield Long/Short ETF (HYLS).

Next page: ‘Turning over every rock for yield’

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