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Recent Risk-On Sentiment Spurs High Yield Bond ETF Flows

This article was originally published on ETFTrends.com.

With the Dow Jones Industrial Average posting five positive days in a row, investors are starting to dip back into the high yield waters. Exchange-traded fund (ETF) flows are showing that a risk-on sentiment is slowly creeping back into the markets, making the case for high-yield bond ETFs.

"Fixed-income was quite active yesterday (Thursday) with the risk-on trend continuing and big flows going into high yield names," said Brian Gilman of ETF Sales & Trading at Virtu Financial.

Names like the iShares iBoxx $ High Yield Corp Bond ETF (HYG) and the SPDR Bloomberg Barclays High Yield Bond ETF (JNK) have been leading the recent charge for high yield. According to data from XTF, fund flows within the past week topped $1.77 billion for HYG, while JNK brought in $331.27 million--both taking two of the top 10 spots for fixed income fund flows the past week.

HYG, in particular, has made a nice bounce off its Christmas Eve low in 2018, rallying towards its 200-day moving average in the one-year chart:

Recent Risk-On Sentiment Spurs Interest in High Yield Bond ETFs 1

“Investors are going to be a little more apprehensive” given recent volatility, said Mohit Bajaj, director of exchange-traded funds at WallachBeth Capital. “All of these funds have moved significantly in the past few weeks.”

High Beta High Yield Option

One fund to consider is the Xtrackers High Beta High Yield Bond ETF (HYUP) , which seeks investment results that correspond generally to the performance, of the Solactive USD High Yield Corporates Total Market High Beta Index. The underlying index is designed to track the performance of the segment of the U.S. dollar denominated high yield corporate bond market that exhibits higher overall beta to the broader high yield corporate fixed income market.

“The last two or three days have been very strong for the high-yield space,” said Jay Pestrichelli, co-founder and managing director of ZEGA Financial. “It’s not at all a clear signal by any means, but it certainly is -- I think -- a reduction in panic.”

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