Megaphone icon ETF Database is now VettaFi. Read More >
ETFdb Logo
ETFdb Logo
  • Channels
    • Active ETF
    • Alternatives
    • Beyond Basic Beta
    • China Insights
    • Climate Insights
    • Commodities
    • Core Strategies
    • Crypto
    • Disruptive Technology
    • Dividend
    • Dual Impact
    • Emerging Markets
    • Energy Infrastructure
    • Entrepreneur ETF
    • Equity ETF
    • ESG
    • ETF Building Blocks
    • ETF Education
    • ETF Strategist
    • Fixed Income
    • Future ETFs
    • Gold & Silver Investing
    • Innovative ETFs
    • Institutional Income Strategies
    • Leveraged & Inverse
    • Managed Futures
    • Modern Alpha
    • Multi-Asset
    • Multi-Factor
    • Nasdaq Investment Intelligence
    • Portfolio Strategies
    • Retirement Income
    • Smart Beta
    • Thematic Investing
    • Volatility Resource
  • Database
  • Tools
    • ETF Screener
    • ETF Country Exposure Tool
    • ETF Sector Tracker Tool
    • ETF Database Categories
    • Head-To-Head ETF Comparison Tool
    • ETF Stock Exposure Tool
    • ETF Issuer Fund Flows
    • Indexes
    • Mutual Fund To ETF Converter
    • ETF Data for Journalists
    • ETF Nerds
  • Research
    • First Bitcoin ETF
    • ETF Education
    • Equity Investing
    • Dividend ETFs
    • Leveraged ETFs
    • Inverse ETFs
    • Top ETF Sectors
    • Top ETF Issuers
    • Top ETF Industries
  • Webcasts
    • ETFs Future-Forward 2021: An iShares Investing Symposium
    • Three Themes for 2021: An iShares & MSCI Investing Symposium
  • Themes
    • AI ETFs
    • Blockchain ETFs
    • See all Thematic Investing ETF themes
    • ESG Investing
    • Marijuana ETFs
  • Videos & Podcasts
    • ETF 360 Video Series
    • ETF Trends on Videos
    • ETF Trends on Podcasts
    • ETF Prime Podcast
  • PRO
    • Pro Content
    • Pro Tools
    • Advanced
    • FAQ
    • Pricing
    • Free Sign Up
    • Login
  1. ETF Education Channel
  2. Bank Loan ETFs Are Direct Yield-Generating Courses
ETF Education Channel
Share

Bank Loan ETFs Are Direct Yield-Generating Courses

Tom LydonApr 11, 2022
2022-04-11

Bond market angst is running high this year. Blame rising interest rates and persistent inflation, but there are avenues for investors to cope with this situation while generating decent yields.

Those include bank loans or senior loans — an asset class accessible via several exchange traded funds, including the Invesco Senior Loan ETF (BKLN B).

Bank loan ETFs are topping Treasuries and have been doing so since government bond yields bottomed in August 2020. The floating rate note (FRN) component found in BKLN and rival funds is a primary reason why these products stand out as premier bond ideas against the backdrop of rising rates. Nearly all of BKLN’s components have maturities of one to five or five to 10 years.

“Loans tend to have floating rate provisions and reset as yields move higher. In our view, these products are the model Prudent Yield example,” says Bank of America in a recent report.

As of April 8, the $5.63 billion BKLN sports a 30-day SEC yield of 3.13%, which is high in the current environment. That’s attributable to the fact that the bulk of bank loans are classified as junk bonds. BKLN reflects as much, as 83% of its 139 holdings are rated BB or B. Fortunately, credit conditions are supportive of high-yield fare.

“Credit conditions remain strong while rates are expected to move higher over the next year or more. Assets like leveraged loans and fallen angel bonds have an attractive mix of low duration and high yield, particularly compared to government bonds, TIPS, and investment grade credit,” adds Bank of America.

Bank of America’s Jared Woodard notes that the B-rated universe is the firm’s preferred credit quality at the moment. That could prove to be positive for funds such as BKLN, particularly as fixed income investors look for credit opportunities that also reduce rate risk — boxes checked by bank loan funds.

It’s easy to understand the allure of BKLN in the current market setting because the fact is that a slew of other, higher-quality bond strategies just aren’t delivering for investors.

“Over the past two years, Treasury bonds have lost more than 20% of their value and global government bonds are set for the worst losses since 1949. More than half of all Treasury bear markets have happened since 2009,” concludes Bank of America. “Other ‘safe’ corners of fixed income like IG corporates and high-quality munis are also struggling. We expect high prices, a hawkish Fed, and inflationary secular policy shifts (e.g. UBI, student loan forgiveness, CBDCs) to keep bonds under pressure.”

For more news, information, and strategy, visit the ETF Education Channel.

Loading Articles...
Help & Info
  • Contact Us
  • Mission Statement
  • Press
Tools
  • ETF Screener
  • ETF Analyzer
  • Mutual Fund to ETF Converter
  • Head-To-Head ETF Comparison
  • ETF Country Exposure Tool
  • ETF Stock Exposure Tool
  • ETF Performance Visualizer
  • ETF Database Model Portfolios
  • ETF Database Realtime Ratings
  • ETF Database Pro
More Tools
  • ETF Launch Center
  • Financial Advisor & RIA Center
  • ETF Database RSS Feed
Explore ETFs
  • ETF News
  • ETF Picks of the Month
  • ETF Category Reports
  • Premium Articles
  • Alphabetical Listing of ETFs
  • Best ETFs
  • Browse ETFs by ETF Database Category
  • Browse ETFs by Index
  • Browse ETFs by Issuer
  • Compare ETFs
Legal
  • Terms of Use and Privacy Policy
  • © ETF Flows LLC
Follow ETF Database
Follow ETF Database

Advertisement

Is Your Portfolio Positioned With Enough Global Exposure?

Equity ETF Channel

Retirement Portfolio Redux: Is the 60%-40% Portfolio Dead?

Debbie CarlsonOct 22, 2020
2020-10-22

With the 10-year U.S. Treasury yield hovering below 1% and Federal Reserve Chairman Jerome Powell...

Equity ETF Channel

Portfolio Diversification Isn't Dead, It Was Just Sleeping

Debbie CarlsonOct 15, 2020
2020-10-15

Investors could be forgiven to think there was no reason to invest outside of the U.S. for the...

}
X