Investors Continue to Favor High Yield ETFs – When About When Music Stops?
Thursday, April 15th, 2010Dan Pritch submits:
The risk trade is on. Investors sitting idly by on the sidelines watching everyone else make 70-100% since the March lows are resolved to the fact that risk-free investment returns are going to be negative in terms of even modest inflation for years to come. As such, investors in the income arena are increasingly shifting funds from safer bets like Treasuries and Money Markets into higher risk assets that actually delivery meaningful yield.
Last month, two high yield ETFs in particular saw massive investor inflows. SPDR Barclays Capital High Yield Bond (JNK) and iShares iBoxx $ High Yield Corporate Bond (HYG) each saw inflows in excess of $400 Million in March. Starting in 2008 and into 2009, high yield corporate bonds (otherwise known as junk bonds) saw huge drops in price under the premise the America was going to see a massive wave of corporate defaults, the likes of which we hadn’t seen since the Great Depression. While the current economy wouldn’t be considered “strong” by any stretch of the imagination, the Armageddon scenario envisioned just a year ago never came to fruition.
