ETF Spotlight: High-Yield Corporate Bonds

By Tom Lydon: The search for income yielding stocks and exchange traded funds has become commonplace these days and made dividend and high-yield bond ETFs very popular.

By Tom Lydon: Exchange traded funds that invest in high-yield corporate bonds have soared in October on signs the economy won’t slip into another recession as investors pile back into riskier assets.The rally has also been fueled by relief that European leaders have put together an agreement on Greek bond haircuts and beefing up the bailout fund. Investors flocked into the safety of U.S. Treasuries this summer amid the sell-off in equities and fears Europe’s debt crisis would explode.

By Tom Lydon: As investors rushed back to the fixed-income market this year, speculative-grade debt has been strengthening. However, with Treasury yields rising again, one rate-hedged junk bond exchange traded fund has been outperforming.

By Tom Lydon: International high-yield bond exchange traded funds are outpacing U.S. junk bonds as European speculative-grade debt rose for the sixth consecutive week.

By Tom Lydon: ETF Spotlight on iShares iBoxx $ HY Corp Bond Fund (HYG), part of an ongoing series. Assets: $14.2 billion. Objective: The iShares iBoxx & High Yield Corporate Bond Fund tries to reflect the performance of the iBoxx $ Liquid High Yield Index, which is comprised of liquid U.S. dollar-denominated, high-yield corporate bonds.

By Tom Lydon: High-yield, speculative grade, junk bond exchange traded funds hold up against other fixed-income assets in a rising interest rate environment.

By Tom Lydon: Investors are turning to junk bond and dividend ETFs for income in a low-rate environment. High-yield ETFs invest in bonds, while dividend funds target the stock market, so the two groups can perform differently.

Jim Pyke submits:Junk bonds, more euphemistically referred to as high yield corporate bonds, offer a good way to diversify an investment portfolio and create current income. These securities offer lower volatility than outright equity, but are lower in the capital structure and of lower credit ratings than invest grade debt. I previously wrote an article that focused on junk bond ETFs.