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High-Yield Bond ETFs Recovering from Taper Tantrum


Speculative-grade corporate debt ETFs are up about 3% so far this week to recover some of the steep losses they suffered in May and June when Treasury yields spiked.

The iShares iBoxx High Yield Corporate Bond (HYG) and SPDR Barclays High Yield Bond (JNK) rallied Thursday after Federal Reserve Chairman Ben Bernanke said the central bank plans to keep interest rates low for the foreseeable future, even if the unemployment rate falls to its 6.5% target.

Bond ETFs have been under pressure recently on speculation the Fed may soon begin tapering its $85 billion a month worth of Treasury bond and mortgage purchases. [High-Yield Bond ETFs Slip on Rate, Liquidity Fears]

However, the high-yield ETFs have recovered close to their 50-day exponential moving averages.

BlackRock and other bond managers say they are finding value in high-yield bonds after the sell-off, MarketWatch reports.

“If you have a longer-term outlook, you can take advantage of the opportunities of spread widening,” said Tony Rodriguez, co-head of fixed income at Nuveen Asset Management, in the report.

In a recent fixed-income strategy report, BlackRock argued for a shift away from bank loan securities toward high-yield bonds. [Bank Loan or Junk Bond ETFs for Yield?]

iShares iBoxx High Yield Corporate Bond

Full disclosure: Tom Lydon’s clients own HYG.

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.