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High-Yield Bonds Rule Fixed Income Market: 6 ETF Winners of Q1

Sanghamitra Saha
Travelers' (TRV) first quarter earnings is likely to benefit from better pricing, high retention, a positive renewal premium and productivity and efficiency gains.

Most of the central banks in the developed economies have adopted a dovish stance from beginning of the year owing to renewed global growth worries. Both the Fed and the European Central Bank downgraded their outlooks on the U.S. and the Euro zone economy, respectively. In fact, both have signaled no further rate hikes as long as the economy needs it.

Notably, this trend is not restricted to just these two central banks, several others in the world have been accommodative as well. In the past one year, emerging economy China cut commercial lenders’ reserve requirement ratio (RRR) five times to make borrowing easier for small and private firms. Notably, the government trimmed 100 bps in January (read: Don't Fear China's Weaker Growth, Play It With These ETFs).

Naturally, assurances of few more months of cheap money inflows provided a boost to the global equity markets. Bond ETFs, especially the high-yield ones, also held their ground thanks to prevailing low interest rates. Investors flocked to this area to in pursuit of higher current income. If this was not enough, the yield curve inversion in the United States at the end of March, sparked off recession jitters. As a result, bonds rallied toward the end of the month (read: Best-Performing Treasury ETFs Amid Market Selloff).

The benchmark 10-year U.S. Treasury yield dropped to a 15-month low. The benchmark U.S. treasury yield was 2.39% on Mar 28, down 37 bps from the start of the month and down 27 bps from the start of the year. So, investors’ drive for high-yield fixed-income securities is understandable.

Below we highlight a few high-yield bond ETF winners of the first quarter (see all High-Yield/Junk Bond ETFs here).

Fidelity High Yield Factor ETF FDHY – Up 8.0%

The fund is actively-managed and charges 45 bps in fees. It yields a hefty 4.02% annually.

Goldman Sachs Access High Yield Corporate Bond ETF GHYB – Up 7.6%

The underlying FTSE Goldman Sachs High Yield Corporate Bond Index looks to measure the performance of high yield corporate bonds denominated in U.S. dollars. It charges 34 bps in fees and yields 5.76% annually.

iShares iBoxx $ High Yield Corporate Bond ETF HYG – Up 7.6%

The underlying Markit iBoxx USD Liquid High Yield Index consists of liquid U.S. dollar denominated, high yield corporate bonds for sale in the United States. It charges 49 bps in fees and yields 5.29% annually.

iShares iBoxx $ High Yield ex Oil & Gas Corporate Bond ETF HYXE – Up 7.7%

Since the energy sector accounts for a considerable portion of the high-yield bond market and oil prices remained pretty subdued in recent years, edgy investors can stay away from the volatile energy market with this ETF.

The underlying Markit iBoxx USD Liquid High Yield ex-Oil & Gas Index comprises of a broad range of U.S. dollar denominated, high yield corporate bonds that excludes those issued by companies in the Oil and Gas sector. It yields 5.88% annually and charges 50 bps in fees.

Invesco Emerging Markets Sovereign Debt ETF PCY – Up 7.5%

Emerging markets have been steady this year due to a dovish Fed and moderate strength in the greenback. The fund’s underlying DBIQ Emerging Market USD Liquid Balanced Index tracks the potential returns of a theoretical portfolio of liquid emerging markets US dollar-denominated government bonds issued by more than 20 emerging-market countries. It yields 4.82% annually and charges 50 bps in fees.

Xtrackers USD High Yield Corporate Bond ETF HYLB – Up 7.5%

The underlying Solactive USD High Yield Corporates Total Market Index is market value weighted index designed to track the performance of High Yield rated corporate bonds issued in USD. It charges 20 bps in fees and yields 5.75% annually.

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Invesco Emerging Markets Sovereign Debt ETF (PCY): ETF Research Reports
 
iShares iBoxx $ High Yield Corporate Bond ETF (HYG): ETF Research Reports
 
iShares iBoxx $ High Yield ex Oil & Gas Corporate Bond ETF (HYXE): ETF Research Reports
 
Xtrackers USD High Yield Corporate Bond ETF (HYLB): ETF Research Reports
 
Fidelity High Yield Factor ETF (FDHY): ETF Research Reports
 
Goldman Sachs Access High Yield Corporate Bond ETF (GHYB): ETF Research Reports
 
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