ETFdb Logo
ETFdb Logo
  • ETF Database
  • Channels
    • Active ETF
    • Alternatives
    • Beyond Basic Beta
    • China Insights
    • Climate Insights
    • Commodities
    • Core Strategies
    • Crypto
    • Disruptive Technology
    • Dividend
    • Dual Impact
    • Emerging Markets
    • Energy Infrastructure
    • ESG
    • ETF Building Blocks
    • ETF Education
    • ETF Strategist
    • Fixed Income
    • Free Cash Flow
    • Future ETFs
    • Global Diversification
    • Gold/Silver/Critical Minerals
    • Innovative ETFs
    • Institutional Income Strategies
    • Leveraged & Inverse
    • Managed Futures
    • Market Insights
    • Megatrends
    • Modern Alpha
    • Multi-Asset
    • Night Effect
    • Portfolio Strategies
    • Retirement Income
    • Richard Bernstein Advisors
    • Tax Efficient Income
    • Thematic Investing
    • Volatility Resource
  • 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
    • Index Education
    • Index Insights
    • Top ETF Sectors
    • Top ETF Issuers
    • Top ETF Industries
  • Webcasts
  • Themes
    • AI ETFs
    • Blockchain ETFs
    • See all Thematic Investing ETF themes
    • ESG Investing
    • Marijuana ETFs
  • Multimedia
    • ETF 360 Video Series
    • ETF Trends on Videos
    • ETF Trends on Podcasts
    • ETF Prime Podcast
  • Company
    • About Us
    • Swag Store
  • PRO
    • Pro Content
    • Pro Tools
    • Advanced
    • FAQ
    • Pricing
    • Free Sign Up
    • Login
  1. Innovative ETFs Channel
  2. Why Inflation May Benefit Corporate Bond Investors
Innovative ETFs Channel
Share

Why Inflation May Benefit Corporate Bond Investors

James ComtoisJul 25, 2022
2022-07-25

With inflation at a record high and yields on so-called corporate junk bonds going through the roof, now may be a good time to consider high yield corporate debt.

“High inflation is great for borrowers because corporate revenues have grown but your debt has not,” said Jason Bloom, Head of Fixed Income and Alternatives ETF Product Strategy at Invesco. “Inflation is inflating the size of the assets, but not the debt.”

The yield on the ICE BofA U.S. High Yield Index, which tracks companies with below investment-grade credit ratings, has more than doubled to about 8.4% from a record low of less than 4% roughly a year ago.

High yield corporate bonds may also provide better downside protection than stocks. Nuveen recently conducted a stress test based on a hypothetical 20% decline in equities and current bond and stock dividend yields and found that while stock prices could fall 19.5%, high yield bonds would lose only 4.5%.

In a note to clients on Monday, Nuveen’s chief investment officer Saira Malik wrote that the record issuance of pandemic debt at low yields has been a tailwind for companies with weaker credit profiles, considering that “debt burdens aren’t excessive and low financing rates have been locked in.” Nuveen estimated that 75% of outstanding high yield corporate debt will come due after 2025, which would offer companies issuing this debt some breathing room if the U.S. economy falls into a recession.

Invesco’s BulletShares high yield corporate bond ETFs come with a range of maturity dates. Depending on the maturity date, the ETF is based on the Nasdaq Bulletshares® USD High Yield Corporate Bond (2022 to 2029) Index. According to Invesco, the funds invest at least 80% of their total assets in corporate bonds that comprise their corresponding index.

The indexes seek to measure the performance of a portfolio of U.S. dollar-denominated, high yield corporate bonds with effective maturities from 2022 to 2029, depending on which ETF is chosen. Instead of purchasing all the securities in their respective indexes, the funds use a “sampling” methodology to seek to achieve their investment objectives.

“With high yield, you’re getting well rewarded for the risk you’re taking,” added Bloom.

The ETFs have an expense ratio of 0.42%.

For more news, information, and strategy, visit the Innovative ETFs Channel.

Loading Articles...
Help & Info
  • Contact Us
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
  • © 2023 VettaFi LLC. All rights reserved.
Follow ETF Database
Follow ETF Database

Advertisement

Is Your Portfolio Positioned With Enough Global Exposure?

ETF Education Channel

How to Allocate Commodities in Portfolios

Tom LydonApr 26, 2022
2022-04-26

A long-running debate in asset allocation circles is how much of a portfolio an investor should...

Core Strategies Channel

Why ETFs Experience Limit Up/Down Protections

Karrie GordonMay 13, 2022
2022-05-13

In a digital age where information moves in milliseconds and millions of participants can transact...

}
X