Appetite for US High Yield Bonds Remains High as Yields Tighten

High yield bond ETFs concentrate on lower quality corporate bonds, which are considered riskier than higher-quality or more established companies. Because of this higher level of risk, high-yield bonds, also known as junk bonds, offer higher yields to investors. US high yield bond ETFs invest at least 65% of capital in binds that are not rated or are rated by S&P or Moody's at or below BB (considered speculative). Because of high returns and the potential for diversification across many markets, regions, and industries, high yield bonds are a major part of many investment strategies.

We track asset class movement and you can see here the fixed income table which is updated weekly.

Assets Class	Symbols	05/06 Trend Score	04/29 Trend Score	Direction
International Inflation Protected	WIP	6.74%	9.22%	v
High Yield	JNK	5.54%	5.68%	v
International Treasury	BWX	5.1%	6.82%	v
Long Term Credit	LQD	3.48%	2.87%	^
Emerging Mkt Bonds	PCY	3.48%	2.21%	^
20+ Year Treasury	TLT	3.38%	1.63%	^
Inflation Protected	TIP	3.09%	3.27%	v
10-20Year Treasury	TLH	2.88%	1.73%	^
Intermediate Term Credit	CIU	2.43%	2.06%	^
Intermediate Treasury	IEF	2.39%	1.65%	^
US Total Bond	BND	2.1%	1.77%	^
MBS Bond	MBB	1.92%	1.83%	^
California Muni	CMF	1.74%	1.99%	v
National Muni	MUB	1.57%	1.24%	^
Short Term Credit	CSJ	1.0%	1.09%	v
New York Muni	NYF	0.64%	0.51%	^
Short Term Treasury	SHY	0.55%	0.53%	^
Treasury Bills	SHV	0.08%	0.07%	^

Trend score is the average of 1,4,13,26 and 52 week total returns (including dividend reinvested).
You can get a no cost widget for any of these tables which will automatically update weekly.

At the end of last week (5/6/2011), high yield bond ETFs, represented by the SPDR Barclays Capital High Yield (JNK), stood among the top of the Fixed Income Return Table. Yields in the sector have declined as risk premiums have tightend on stronger performance by companies with lower credit ratings. While returns on corporate bonds have declined slightly in recent periods, ETFs that track the market have continually offered strong returns relative to other fixed income securities.

U.S. High Yield Bonds

05/06/2011

Description	Symbol	1 Yr	3 Yr	5 Yr	Avg. Volume(K)	1 Yr Sharpe
iShares iBoxx $ High Yield Corp	HYG	17.67%	7.03%	NA	1,247	270.24%
SPDR Barclays Capital High Yield	JNK	20.83%	8.41%	NA	2,972	279.79%
PowerShares Fundamental High Yield	PHB	19.2%	0.79%	NA	302	318.25%

Among US High Yield Bond ETFs, the top performers include the SPDR Barclays Capital High Yield (JNK), the Powershares Fundamental High Yield ETF (PHB), and the iShares iBoxx $ High Yield Corporate ETF (HYG) returning 20.83%, 19.20%, 17.67% respectively in the past year.

With the highest one-year return and the highest trading volume, the SPDR Barclays Capital High Yield ETF remains a srtong investment option. The ETF is well diversified, with no single bond comprising more than 4% of total assets and the top 10% of assets making up only 22.58% of the total.

Going forward, yields on high yield corporate debt should continue to tighten as long as companies continue to generate strong performance. Still, high yield corporate bond ETFs should continue to offer attractive returns relative to other fixed income assets.

Corporate bonds are an important component of diversified bond portfolios, as they offer greater returns and risks than government bonds. Due to their high level of interest paid, generally in the form of monthly distributions, corporate bond ETFs may be especially suitable for individuals approaching or already in retirement. As with any investment, it is important to make sure the risk and return levels match up with your personal investment goals.

Symbols: AGG, BND, SHV, SHY, IEF, TLH, TLT, TIP, WIP, HYG, JNK, PHB, CSJ, CIU, LQD, BWX, CMF, NYF, MUB, MBB, PCY, EMB

Tickers: AGG, BND, SHV, SHY, IEF, TLH, TLT, TIP, WIP, HYG, JNK, PHB, CSJ, CIU, LQD, BWX, CMF, NYF, MUB, MBB, PCY, EMB

Disclosure:

MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical.

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