PIMCO Short-Duration, High-Yield ETF Rakes in Cash on Rate Fears

ETF Trends

PIMCO 0-5 Year High Yield Corporate Bond Index (HYS) has seen cash fly in the door the past few months as investors hunt for junk debt ETFs that provide some protection from rising interest rates.

The PIMCO ETF has gathered net flows of $948.7 million so far this year, according to IndexUniverse data. That’s a hefty inflow for a fund that currently stands at about $1.8 billion in assets under management.

In fact, HYS saw record one-day deposits of $240.1 million on Monday, Bloomberg News reports. Conversely, SPDR Barclays High Yield Bond ETF (JNK) saw a record outflow on the same day. [High-Yield ETF Sees Nearly $400 Million One-Day Outflow]

JNK has a modified adjusted duration of 4.15 years while HYS has an effective duration of 1.89 years.

“HYS has a lower duration than its competitors in the high-yield bond category, which means that the fund will be less affected by rising interest rates,” says Morningstar analyst Timothy Strauts in a profile of the PIMCO ETF.

HYS is paying a 30-day SEC yield of 3.47%, compared with 5.06% for JNK.

The PIMCO ETF have roughly doubled in size since the start of the year, notes Chris Hempstead, director of ETF execution services at WallachBeth Capital.

“The slope is steep here,” he commented on the ETF’s recent growth. “We have seen this before. I wonder where it stops.”

PIMCO 0-5 Year High Yield Corporate Bond Index

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Full disclosure: Tom Lydon’s clients own JNK.

The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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