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Europe Junk Bond ETF Sees Big Inflows

After U.S. retail investors scampered out of high-yield debt exchange traded funds, there is evidence to suggest institutional investors have been buying up shares of those ETFs.

A similar scenario could be at play in Europe where the iShares Euro High Yield Corporate Bond ETF gained $81.3 million in new assets Wednesday, the ETF’s largest one-day inflows since May, report Katie Linsell and Alastair Marsh for Bloomberg.

Prior to Wednesday, the ETF had bled almost $439 million this month as “bondholder confidence was hurt by escalating geopolitical conflicts in Ukraine and Gaza,” according to Bloomberg.

In the U.S., flows to junk bond ETFs have picked up following a mass exodus in July. Junk bond funds and ETFs experienced $13 billion in outflows as skittish retail investors exited the market over the four weeks ended August 6, the Wall Street Journal reports. [Investors Flock to Discounted Junk Bond ETFs]

In just the past week, the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) and the SPDR Barclays High Yield Bond ETF (JNK) , the two largest U.S. junk bond ETFs by assets, have added over $531 million in assets combined. Since Aug. 7, HYG and JNK have added nearly $1.5 billion in new assets combined.

U.S. investors have recently been restrained in their purchases and sales of ETFs heavy on European high-yield debt. For example, the $208.3 million Market Vectors International High Yield Bond ETF (IHY) has not gained or lost any assets this month.

At the end of July, IHY allocated 38% of its combined weight to France, the U.K., Italy and Germany, according to Market Vectors data. IHY has a modified duration of 4.59 years, a yield to worst of 5.2% and a 30-day SEC yield of 4.72%.

The iShares Global ex USD High Yield Corporate Bond ETF (HYXU) has lost $28.2 million this month. That ETF features heavy European high-yield exposure with an almost 80% combined weight to Luxembourg, Italy, France, the U.K., Germany, the Netherlands and Spain. [Time to Be Cautious on European Bond ETFs]

SPDR Barclays High Yield Bond ETF


ETF Trends editorial team contributed to this post. Tom Lydon’s clients own shares of HYG and JNK.

The opinions and forecasts expressed herein are solely those of Tom Lydon, 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.