FMD Capital Management

Posts Tagged: jnk

Defensive Strategies For High Yield Bond ETFs

Written by David Fabian, November 15th, 2017

Since early 2016, the trend in credit-sensitive securities has been predominantly higher as yield spreads compress and risk behavior leans on the bullish side. Income-focused investors have poured billions of dollars into exchange-traded funds that track these markets, led by the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) and SPDR High Yield Corporate Bond ETF (JNK).

More recently, HYG and JNK have exhibited several sharp down days despite the relative calm buoying the global equity markets.  This divergence has many bond investors worried about the future growth prospects of high yield debt and whether they should shield their gains from a potential correction in risk assets.

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Are High Yield ETFs Becoming Too Hot To Handle?

Written by David Fabian, February 17th, 2017

Love is in the air this Valentines week and many income investors are smitten with the returns of their high yield investments.  The steady march higher in assets like junk bonds, preferred stocks, emerging market debt, and even leveraged closed-end funds has remunerated shareholders for their faith.

The poster child of this strength may well be the iShares iBoxx $ High Yield Corporate Bond ETF (HYG).  This well-known fund, which invests in a passive index of high yield U.S. corporate debt, has gained more than 22% over the last year.  That jump includes both price gains and income distribution over a 52-week period.  It also bests every corner of the U.S. fixed-income sector map by a wide margin.  Read more

Corporate Bond ETFs Are Back In High Demand

Written by David Fabian, April 05th, 2016

Exchange-traded funds that track corporate bond benchmarks are back in high demand this year after a lackluster performance in 2015 threatened to undermine confidence in the credit markets.  Fixed-income investors have seemingly shrugged off the threat of rising interest rates and weakening credit fundamentals to pounce on sectors demonstrating relative value to high-flying Treasury and municipal bonds.

The iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) is a prime example of this trend.  This ETF tracks 1,564 corporate bonds of companies with high quality credit ratings such as Verizon Communications (VZ) and Apple Inc (AAPL).

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Why I Will Likely Be A Buyer Of High Yield In 2016

Written by David Fabian, December 13th, 2015

By now you have probably read everything about the death of high yield bonds, the investor lockup at Third Avenue, and the risk that these “junky” assets pose to exchange-traded funds.  Believe me, the financial media is just getting started slicing and dicing this thing up.  Everyone loves to sink their teeth into an investment that is tanking.  It makes for great headlines and offers a curiously similar effect as gliding by an accident on the freeway.  Despite our best intentions, we all slow down to take a peek. Read more

2 High Yield ETFs Signal Credit Upheaval

Written by David Fabian, December 08th, 2015

Years of low interest rates and minimal inflation have resulted in many ETF investors adopting these investments as surrogates for more conservative options.  Furthermore, a prolonged period of relatively low volatility may have lulled these same participants into a false sense of security.

The lesson that many are learning is that a reach for yield also comes with an associated greater risk of volatility in price.  That volatility may be finally starting to rear its ugly head, as two heavily owned high yield funds have fallen precipitously in recent months.

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