Fund

Junk Bond ETFs

iShares iBoxx $ High Yield Corporate Bond ETF is the largest Junk Bond ETF (HYG).  It tracks the Markit iBoxx USD Liquid High Yield Index and holds nearly 1,000 high-yield corporate bonds, with an effective duration of 3.75 years.

Year-to-date, investors have pulled $1.81 billion from HYG. Over 85% of the ETF’s holdings are rated BB or B, but HYG does devote 10% of its portfolio to highly speculative CCC-rated bonds. The fund has a 30-day SEC yield of 5.84% and charges 0.49% per year.

SPDR Bloomberg Barclays High Yield Bond ETF (JNK) is the second-largest junk bond ETF with about $1 billion by assets.  It tracks the Bloomberg Barclays High Yield Very Liquid Index and “seeks to provide a a diversified exposure to US dollar-denominated high yield corporate bonds with above-average liquidity.

JNK, holds over 900 junk bonds. The fund’s option-adjusted duration if just over 4 years and its yield to maturity is 6.61%.

Over 86% of JNK’s holdings are rated BB or B, but over 13% carry the speculative CCC rating as well. JNK compensates investors for the risk with a 30-day SEC yield of 6.17%.

HYG Vs JNK

The chart below illustrates the performance between the two Junk Bond ETFs:

HYG is consistently outperforming JNK.

Reference:

  1. ETFtrends.com, Tom Lydon, 2018-08-01, “The King of Junk Bond ETFs”
  2. ETFtrends.com, Tom Lydon, 2018-08-02, “An Old Favourite Among Junk Bond ETFs”
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