ProShares Short High Yield ETF(SJB)- NYSEARCA
  • Tue, Sep. 13, 2:30 PM
    • August's dip in the junk bond default rate looks like just a temporary blip in trend as $3.8B in defaults have already been announced this month (most by energy companies).
    • Fitch's Eric Rosenthal thinks energy defaults could come to 16-18% by year-end - and that's assuming oil doesn't fall back into the low-$40s or $30s. Crude is down 2.7% today to $45.04 per barrel.
    • ETFs: HYG, JNK, HIX, DHY, HYLD, PHT, EAD, HYT, JQC, CIK, DSU, HHY, SJB, NHS, ACP, PHF, FHY
    | Tue, Sep. 13, 2:30 PM | 2 Comments
  • Thu, Sep. 1, 3:05 PM
    • Excepting the post-recession years of 2003 and 2009, high-yield is having its best year on record, says Goldman Sachs, with the magnitude of the spread tightening since the February 11 bottom exceeding the team's expectations.
    • Said spread tightening is responsible for 51% of the sector's YTD return, while coupon income was good for 31%, and lower rate 18%.
    • Spreads are currently at 588 basis points - already below Goldman's year-end forecast - so it's likely coupon income will have to be responsible for any returns from here to the end of 2016. The risk to the bank's spread forecast is "strongly skewed" to the upside.
    • ETFs: HYG, JNK, HIX, DHY, HYLD, PHT, EAD, HYT, JQC, CIK, DSU, HHY, SJB, NHS, ACP, PHF, FHY
    | Thu, Sep. 1, 3:05 PM | 2 Comments
  • Tue, Aug. 9, 11:10 AM
    • The global default rate for bonds rated below investment-grade rose to 4.7% in July, according to Moody's. That's up from 4.6% in June and compares to the long-term default rate of 4.2%.
    • The year-to-date tally of default hit 102 after 11 defaults in July - the highest monthly amount since 2009.
    • Moody's expects the default rate to peak at 5.1% in November, before sliding back to 3.9% by next July. For the U.S., the junk bond default rate was 5.5% at July's end, up from 5.2% in June. It's expected to peak at 6.3% by year-end.
    • In no surprise, it's the commodity sectors leading the way, with a 10% default rate forecast for metals & mining, and 7.2% for oil & gas issuers over the coming year.
    • ETFs: HYG, JNK, HIX, DHY, HYLD, PHT, EAD, HYT, JQC, CIK, DSU, HHY, SJB, NHS, ACP, PHF, FHY
    | Tue, Aug. 9, 11:10 AM | 3 Comments
  • Fri, Jul. 15, 3:28 PM
    • "They’re out there scrounging through the dumpster looking for yield,” says one strategist. "When you have artificially low rates, you force people to go out and look for things that they normally wouldn’t.”
    • High-yield mutual funds flew off the shelves this week, with $4.35B in deposits - the largest in more than four months. Looking at individual issues, a $375M bond sold by Valvoline drew $4.5B in orders, allowing the issuer to cut the yield on the offering by as much as 50 basis points.
    • With $12T of bonds globally offering a negative yield, what's an investor to do?
    • ETFs: HYG, JNK, HIX, DHY, HYLD, PHT, EAD, HYT, JQC, CIK, DSU, HHY, SJB, NHS, ACP, PHF, FHY, MCI, KIO
    | Fri, Jul. 15, 3:28 PM | 3 Comments
  • Tue, Jun. 21, 2:56 PM
    • Covenant quality tumbled to 4.56 in May from 3.8 the previous month, according to Moody's, which rates on a one-to-five scale, with five being the worst. It was the largest single-month change on record.
    • Marty Fridson calls the plunge "a discouraging setback," but notes it could be due to the large amount of higher-rated junk issued in May - those high-yield bonds with stronger ratings tend to have easier covenants than the really junky stuff.
    • More from Fridson: "The long-run trend of covenant quality since the 2011 inception of the Moody’s series has been dismayingly negative. That tendency has been abetted by the investment banks, which compete for underwriting mandates partly on the basis of devising new loopholes."
    • ETFs: HYG, JNK, HIX, DHY, HYLD, PHT, EAD, HYT, JQC, CIK, DSU, HHY, SJB, NHS, ACP, PHF, MCI, FHY, KIO, ARDC, ANGL, VLT, CIF, AIF, MPV, MHY, PCF, IVH, DHG, HYLS, JSD, UJB, GGM, CJNK, QLTC, HYIH, WFHY
    | Tue, Jun. 21, 2:56 PM | 5 Comments
  • Wed, May 25, 1:27 PM
    | Wed, May 25, 1:27 PM | 13 Comments
  • Wed, May 18, 11:52 AM
    • The recovery rate for high-yield bonds has been a super-low 13.9% thus far this year, according to Marty Fridson, continuing a trend begun last year when the recovery rate fell to 34%.
    • Source: Barron's
    • It's curious given the low default rate - just 2.83% in 2015 vs. the long-term average of 3.33%. Usually low default rates mean high recovery rates.
    • Fridson: "This outcome has generated anxiety among high-yield portfolio managers. Has some structural change taken place, they wonder, such that investors should expect lower average recovery rates over the remainder of the present credit cycle than in the past?"
    • Answering his own question, Fridson says special conditions associated with the energy crash along with one large, non-energy defaulter are behind the low recovery rate. For now, there's no clear evidence that recoveries on a more general basis are lower than they should be.
    • ETFs: HYG, JNK, HIX, DHY, HYLD, PHT, EAD, HYT, JQC, CIK, DSU, HHY, SJB, NHS, ACP, PHF, MCI, FHY, KIO, ARDC, ANGL, VLT, CIF, AIF, MPV, MHY, PCF, IVH, DHG, HYLS, JSD, UJB, GGM, CJNK, QLTC, HYIH
    | Wed, May 18, 11:52 AM | 8 Comments
  • Tue, May 10, 11:37 AM
    • Moody's now expects global speculative-grade defaults to hit 5% by the end of November - that's up from 4.6% forecast one month ago, and 3.8% prior to that.
    • Perhaps looking in the rearview mirror as it drives, the agency takes note of the oil price slump as continuing to put upward pressure on defaults. Being at least a tiny bit forward-looking, Moody's at least mentions tighter credit spreads of late as perhaps suggesting the default rate could taper.
    • Of 46 defaults recorded in the year's first four months, 18 were in oil and gas, and 9 in metals and mining.
    • In the U.S. the default rate for metals and mining companies is expected to rise to 11.5%; and for oil and gas to 10.3%.
    • ETFs: HYG, JNK, HIX, DHY, HYLD, PHT, EAD, HYT, JQC, CIK, DSU, HHY, SJB, NHS, ACP, PHF, MCI, FHY, KIO, ARDC, ANGL, VLT, CIF, AIF, MPV, MHY, PCF, IVH, DHG, HYLS, JSD, UJB, GGM, CJNK, QLTC, HYIH
    | Tue, May 10, 11:37 AM | 1 Comment
  • Fri, Apr. 22, 11:30 AM
    • After a tough start to the year, junk bonds are on a tear - now having returned 6% YTD, with the overall yield sliding to just 6.9% from 10% earlier in 2016.
    • The bigger action has been in the junkiest of the junk sectors, with paper rated CCC having returned a full 9% YTD, including that of low-grade energy companies having returned 10%.
    • The term "Goldilocks" has re-entered the lexicon, with bulls saying we've got an economy strong enough to prevent defaults, but not so strong as to warrant tighter monetary policy. The oil price crash? Yesterday's news, they say.
    • Marty Fridson says high-yield has returned to "extreme overvaluation" territory. Jeff Gundlach, however, calls junk bonds still somewhat cheap, though noting the high proportion of the lowest-quality paper being issued of late.
    • Bottom line, writes Robin Wigglesworth in the FT: The rally should continue if for no other reason than the world remains yield-starved.
    • ETFs: HYG, JNK, HIX, DHY, HYLD, PHT, EAD, HYT, JQC, CIK, DSU, HHY, SJB, NHS, ACP, PHF, MCI, FHY, KIO, ANGL, ARDC, VLT, CIF, AIF, MPV, MHY, PCF, DHG, IVH, HYLS, JSD, UJB, GGM, CJNK, QLTC
    • Now read: Pessimism Recedes (April 21)
    | Fri, Apr. 22, 11:30 AM | 5 Comments
  • Tue, Apr. 12, 12:48 PM
    | Tue, Apr. 12, 12:48 PM | 1 Comment
  • Mon, Apr. 11, 3:23 PM
    • "Simply put, clients were not being compensated for credit risk," says the team of Matthew Mish and Stephen Caprio.
    • A slowdown in U.S. growth could be the catalyst that pricks the bubble, they say as speculative credits find it even more expensive to borrow.
    • It could be happening now as high-yield issuance is lower by 53% this year, and the lowest-grade paper (CCC ratings) yields 15.2% even after the big rally of the past couple of months.
    • If they're correct, the two say spreads to Treasurys could more than double to 16.4%. "Investors were herded into lower-quality credit risk for a yield pick-up of a couple hundred basis points ... But the fundamental problem is that the default risk is exponential, not linear in these securities."
    • ETFs: HYG, JNK, HIX, DHY, HYLD, PHT, EAD, HYT, JQC, CIK, DSU, HHY, SJB, NHS, ACP, PHF, MCI, FHY, KIO, ANGL, ARDC, VLT, CIF, AIF, MPV, MHY, PCF, DHG, IVH, HYLS, JSD, UJB, GGM, CJNK, QLTC
    | Mon, Apr. 11, 3:23 PM | 18 Comments
  • Thu, Mar. 24, 11:28 AM
    • According to S&P, the average corporate credit rating is BB-, or two notches below investment grade. A 15-year low means this gauge is weaker today than at the height of the financial crisis.
    • At work here - beside the raft of energy and commodity-related downgrades - are easy corporate lending conditions which allow those companies with weaker credit ratings to tap the borrowing market.
    • Unfortunately, says S&P, lower-graded issuers seeking to refinance in the coming months are going to find less welcoming conditions. "A recalibrated, smaller, and more conservative lending environment, where restricted capital market access will enable lenders to better dictate terms and conditions, could prompt liquidity challenges, accelerate downgrades, and ultimately lead to a spike in defaults."
    • ETFs: HYG, JNK, LQD, HIX, HYLD, DHY, PHT, EAD, HYT, JQC, CIK, DSU, CORP, HHY, SJB, PHF, NHS, FHY, ACP, MCI
    | Thu, Mar. 24, 11:28 AM | 12 Comments
  • Wed, Mar. 23, 9:10 AM
    • There's typically very little relationship between the returns on non-energy junk bonds and the price of oil, but the correlation between the two has soared of late to an all-time high of nearly 0.65 (with 1.00 being an exact match), according to Deutsche Bank.
    • Non-energy junk bonds make up about 88% of the high-yield market, according to BAML, which says the tight linkage today means investors aren't paying enough attention to growing risks among junk issuers. Among them: As the price of oil rises, junk bond prices improve even as costs high-yield issuers like manufacturers and transportation companies.
    • ETFs: HYG, JNK, HIX, HYLD, DHY, PHT, EAD, HYT, JQC, CIK, DSU, HHY, SJB, PHF, NHS, FHY, ACP, MCI, KIO, VLT, ARDC, ANGL, CIF, AIF, MHY, PCF, MPV, DHG, HYLS, IVH, JSD, UJB, GGM, CJNK, QLTC
    | Wed, Mar. 23, 9:10 AM | 6 Comments
  • Fri, Mar. 18, 9:29 AM
    • With another week of inflows ($2.01B last week), U.S. high-yield funds have now recorded five straight weeks of inflows since what may or may not be a major bottom on Feb. 11. Over just the last four weeks, funds have drawn in $11.52B, the largest-ever one-month gain for that asset class, according to BAML.
    • BAML's Michael Contoupolos, however, pulls out the yellow flag: "The fundamental backdrop has not changed and defaults are in fact increasing ... These inflows are an over-reaction to transitory tailwinds ... The recent rally has limited staying power."
    • ETFs: HYG, JNK, HIX, HYLD, DHY, PHT, EAD, HYT, JQC, CIK, DSU, HHY, SJB, PHF, NHS, FHY, ACP, MCI, KIO, VLT, ARDC, ANGL, CIF, AIF, MHY, PCF, MPV, DHG, HYLS, IVH, JSD, UJB, GGM, CJNK, QLTC
    | Fri, Mar. 18, 9:29 AM | 13 Comments
  • Fri, Mar. 11, 8:35 AM
    • U.S. corporate investment-grade funds saw the most inflows in a year in the week ended March 9, while loans funds had their first inflows since mid-2015, Lipper said late yesterday.
    • IG funds saw inflows of $2.18B vs. outflows of $761M in the previous week. Most inflows since Feb. 2015.
    • Loans funds saw inflows of $55M vs outflows of $357M in the prior week. This marks the first week of inflows since July 2015.
    • Corporate high-yield funds saw inflows of $1.8B, vs. inflows of $4.97B last week. This was the fourth straight week of inflows.
    • U.S. government Treasury funds saw outflows of $326M vs. outflows of $2.08B in the previous week. The second straight week of outflows.
    • U.S. government mortgage funds had inflows of $547M vs. inflows of $425M a week ago.
    • Muni funds had inflows of $518M vs. inflows of $212M a week ago. 23rd straight week of inflows.
    • ETFs: HYG, JNK, LQD, HIX, HYLD, DHY, PHT, EAD, HYT, VCSH, JQC, VCLT, CIK, VCIT, DSU, CORP, HHY, SJB, CSJ, PHF, NHS, FHY, ACP, MCI, KIO, VLT, CIU, ARDC, ANGL, CSI, CIF, AIF, MHY, PCF
    | Fri, Mar. 11, 8:35 AM | 1 Comment
  • Fri, Mar. 4, 7:42 AM
    | Fri, Mar. 4, 7:42 AM | 9 Comments
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