SPDR Short-Term Junk Bond Due Out Today (JNK, SJNK)

State Street's STT State Street Global Advisors, the second-largest U.S. ETF issuer, will introduce the PDR Barclays Capital Short Term High Yield Bond ETF SJNK today. The new ETF will track the Barclays Capital [0-5 Cash Pay Constrained High Yield] Index. That index is comprised dollar-denominated non-investment grade junk bonds that have a remaining maturity of less than 5 years regardless of optionality, are rated high-yield. SJNK's index only tracks corporate issues from the financial services, industrials and utilities sectors. "The value of high yield securities may be more susceptible to real or perceived adverse economic, company or industry conditions than is the case for higher quality securities. The market values of certain of these lower-rated and unrated debt securities tend to reflect individual issuer developments to a greater extent than do higher-rated securities which react primarily to fluctuations in the general level of interest rates, and tend to be more sensitive to economic conditions than are higher-rated securities. Adverse market, credit or economic conditions could make it difficult at certain times to sell certain high yield securities held by the Fund," according to SJNK's prospectus. SJNK may invest up to 20% of its assets in derivatives, including exchange-traded futures and options contracts and swap agreements, including credit default swaps, and may also purchase and sell put and call options. Junk bonds have served as a measuring for risk appetite and if SJNK attracts sufficient assets and volume, the fund could prove useful on that front as well. However, high-yield bond ETFs have been criticized for being more volatile and susceptible to underperformance than their mutual fund counterparts. These ETFs represent roughly 3% of the entire high-yield universe but nearly 40% of the $14.2 billion in high-yield inflows seen this year, Barron's reported, citing Redwood Investment Management. Despite the criticism, the SPDR Barclays Capital High Yield Bond ETF JNK has almost $11.8 billion in AUM. That ETF currently yields 7.35%.