ETFdb Logo
ETFdb Logo
  • ETF Database
  • Channels
    • Active ETF
    • Beyond Basic Beta
    • China Insights
    • Climate Insights
    • Commodities
    • Core Strategies
    • Crypto
    • Direct Indexing
    • Disruptive Technology
    • Energy Infrastructure
    • ETF Building Blocks
    • ETF Education
    • ETF Strategist
    • Financial Literacy
    • Fixed Income
    • Gold/Silver/Critical Minerals
    • Innovative ETFs
    • Institutional Income Strategies
    • Leveraged & Inverse
    • Managed Futures
    • Market Insights
    • Modern Alpha
    • Multifactor
    • Night Effect
    • Portfolio Strategies
    • Responsible Investing
    • Retirement Income
    • Richard Bernstein Advisors
    • Tax Efficient Income
  • 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
  • Research
    • 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 of the Week Podcast
    • ETF Prime Podcast
    • Video
  • Company
    • About VettaFi
    • Get VettaFi’ed
  • PRO
    • Pro Content
    • Pro Tools
    • Advanced
    • FAQ
    • Pricing
    • Free Sign Up
    • Login
  1. Is Junk Bond Market Heading to Ultra-Risky Territory?
News
Share

Is Junk Bond Market Heading to Ultra-Risky Territory?

Ben HernandezFeb 12, 2020
2020-02-12

Wall Street is sounding the bell on the high yield debt market as investors’ appetite for yield is still strong, which is only fueled by low interest rates and in some parts of the world, negative interest rates. As the economy in the U.S keeps showing positive data like the record-low unemployment rate, this could keep fueling a risk-on sentiment in the corporate world–a green light for more debt.

“We think risks are elevated. We are concerned about the level of corporate profits,” said Collin Martin, a fixed income strategist at Charles Schwab. “We think too many people are reaching for yield.”

Debt accumulation in the corporate world has been warranted, however. According to a CNBC report, “the past decade-plus have been in a race for yield as the Federal Reserve has kept benchmark rates low and as borrowing costs for corporates, even at the lowest end of the credit spectrum, remain cheap. The ICE BofAML High Yield Master II effective yield is around 5.3%, near the lowest its been for the entire recovery cycle and well off the most recent high near 10% in February 2016.”

While low yields might be a detractor for investors, it’s a boon for corporations looking to rack up debt on the cheap. Record low interest rates have allowed companies to refinance existing debt for those with lower interest rates and the cycle continues in this current low-yield environment.

“A lot of the financial institutions are taking advantage and just refinancing and refinancing,” Martin said.

This, apparently, isn’t stopping investors who are snatching up this risky debt via high yield bonds.

“It’s a risk, but no one cares,” Martin said. “People are buying everything.”


Content continues below advertisement

Quenching the Thirst for Yield with “HYLD”

Global yields being at these basement low levels is generating interest in high-yield options like the High Yield ETF (HYLD B-).

HYLD provides exposure to a high income investment strategy that selects a focused portfolio of high yield securities. Utilizing a value-based, active credit approach to the markets, HYLD primarily focuses on the secondary market where there is less competition and more opportunities for capital gains.

The Portfolio Manager relies on their own fundamental credit analysis with an emphasis on a company’s ability to pay back their debts with free cash flow. HYLD seeks to provide high income and diversification benefits to the income portion of a portfolio.

This article originally appeared on ETFTrends.com.

» Popular Pages

  • Tickers
  • Articles

Jun 06

Fidelity Thematic Funds to Convert Within Two Weeks

Jun 06

Investors Increasingly Prefer SPYI for Income

Jun 06

ETF Prime: Tom Lydon Discusses Advisor Polling Data

Jun 06

Is Your Portfolio Ready for Economic Weakening?

Jun 06

4 Top-Performing Real Estate ETFs to Consider

Jun 06

Invesco Changes Tickers for Its Equal-Weight Sector ETFs

Jun 06

Invesco’s S&P 500 Quality ETF Crosses $1 Billion in Flows

Jun 06

Looking Into Blue Chip Growth ETF TCHP

Jun 06

Target Precise Fixed Income Exposure While Yields Are Up

Jun 06

The Dow, S&P 500, and Nasdaq Since Their 2000 Highs

QQQ

Invesco QQQ Trust

SPY

SPDR S&P 500 ETF Trust

VOO

Vanguard S&P 500 ETF

VGT

Vanguard Information...

IYW

iShares U.S. Technology ETF

JEPI

JPMorgan Equity Premium...

SCHD

Schwab US Dividend Equity ETF...

BOTZ

Global X Robotics &...

XLK

Technology Select Sector SPDR...

SMH

VanEck Semiconductor ETF


Content continues below advertisement

Loading Articles...
Our Sites
  • VettaFi
  • Advisor Perspectives
  • ETF Trends
Tools
  • ETF Screener
  • Mutual Fund to ETF Converter
  • Head-To-Head ETF Comparison
  • ETF Country Exposure Tool
  • ETF Stock Exposure Tool
  • ETF Database Pro
More Tools
  • Financial Advisor & RIA Center
Explore ETFs
  • ETF News
  • ETF Category Reports
  • Premium Articles
  • Alphabetical Listing of ETFs
  • Browse ETFs by ETF Database Category
  • Browse ETFs by Index
  • Browse ETFs by Issuer
  • Compare ETFs
Information
  • Contact Us
  • Terms of Use and Privacy Policy
  • © 2023 VettaFi LLC. All rights reserved.

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