Looking at your fixed income options? With rate cuts on the horizon for U.S. investors, it may be worth revisiting the available options. While U.S. bonds present a wide variety of opportunities, themselves, from corporate to municipal to mortgaged-backed securities, it may be worth looking abroad, past U.S. debt securities. Intriguingly, the high yield Asia bond ETF space may stand out in particular via KHYB.
See more: Look to China Internet ETF KWEB as PBOC Cuts Rates
The KraneShares Asia Pacific High Income USD Bond ETF (KHYB ) has returned 12.8% over the last one year period on an annualized, NAV basis per KraneShares data. The high yield Asia bond ETF has outperformed the Broad-Based Securities Market Index (BBSMI) in that time. The index has returned 7.56% over that period.
Charging a 69 basis point (bps) fee, the strategy actively invests in high-income-producing debt securities. KHYB considers bonds of any maturity from governments and corporations from developed and emerging markets in the Asia-Pacific region. The strategy represents a partnership between KraneShares and Nikko Asset Management.
KHYB portfolio manager Wai Hoong Leung participated in a recent Q&A to discuss the strategy, addressing the fund’s standout performance among high yield strategies.
Leung pointed to the Asia high yield credit cycle reaching its recovery phase as a key factor. He underlined that macro support from the Chinese government could provide further stabilization amid an already resilient credit environment across Asia.
What’s more, Leung said, Asia’s corporate high yield market offers a wider spread of yields. Outside of China, specifically, those yields can exceed those of similarly-rated U.S. bonds.
“This makes Asia HY spreads relatively more attractive and provides opportunities for credit selection among investor,” Leung said.
Taken together, a high yield Asia bond ETF like KHYB could appeal. With 30-day yields at about 7.28% per KraneShares, it may be worth a closer look.
For more news, information, and analysis, visit the China Insights Channel.
