Following Redemptions, Junk Bond ETFs at Multi-Week Highs

Calls that high-yield bond ETFs are damaged goods appear to have been premature. It was less than three weeks ago that some mainstream financial media outlets were quick to highlight outflows from the largest U.S. junk bond ETFs, including the iShares iBoxx $ High Yield Corporate Bond Fund HYG. Recent price action in HYG and rival funds such as the SPDR Barclays Capital High Yield Bond ETF JNK suggests recent outflows have had minimal impact on the performance of these funds. HYG and JNK, the two largest junk bond ETFs by assets, closed flat on Tuesday, but the flat close is enough to have both funds trading at multi-week highs. HYG closed today at its highest levels since mid-October looks poised to breakthrough some stiff resistance at $93. JNK is bumping against strong resistance at $40.50, but even after falling one cent on Tuesday, the ETF is still at its highest price area since October. The PowerShares Fundamental High Corporate Bond ETF PHB also closed flat on the day, but that is enough to have ETF at its highest price in nearly two months. PHB closed less than 0.2 percent below its 52-week high. In another sign that investors are still embracing high-yield bond ETFs, some of these ETFs are seeing surging inflows. As Benzinga noted on November 14, the SPDR Barclays Short Term High Yield Bond ETF SJNK had $433.1 million in assets under management on November 13. That number has since soared to $518.7 million, according to State Street data. Additionally, the The PowerShares Senior Loan Portfolio BKLN continues to add to its AUM total. In mid-November, the ETF's assets tally was $1.32 billion. At the start of trading on December 4, that number had grown to $1.37 billion. BKLN closed Tuesday less than 50 cents below its all-time high. Then there is the case of the Market Vectors International High Yield Bond ETF IHY. IHY, which debuted in April, also closed Tuesday at its highest levels since October. The ETF, one of the first to give investors access to global high-yield corporates, is arguably the poster child for the inability of some market observers and participants to comprehend the fact there are other junk bond ETFs on the out there besides HYG and JNK. IHY has returned 4.3 percent since its debut and $195.4 million in AUM as of December 3, according to Market Vectors data. That is up from $180.7 million just two weeks ago and a nearly ten-fold increase in assets since late September. For more on ETFs, click here.