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New PIMCO ETF Targets Shorter-Term Corporate 'Junk'Tom Lydon • Jun 22, 2011
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The Fund seeks to provide total return that closely corresponds,before fees and expenses, to the total return of The BofA Merrill Lynch 0-5 Year US High Yield Constrained IndexSM*.
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Country: United States
Thursday, Aug 154:14 PMJunk bonds again overvalued says Marty Fridson
Thursday, Aug 154:14 PM| Comment!
- The high yield giant's fair value would put the BAML U.S. High Yield Master II index at a spread of 536 basis points to Treasurys vs. 469 bps at Wednesday's close. Fridson calculates fair value with a regression formula plugging in credit availability data, economic numbers, Treasury yields, and the current default rate.
- Today's overvaluation of 67 bps remains less than the year's peak of 130.
- Overvaluation in high yield typically doesn't last long, says Fridson, as bondholders tend to be sellers into the better pricing. "You can be pretty confident that if you are in an overvalued state, within a few months it will get back to fair value."
- Related ETFs: HYG, JNK, PHB, HYLD, HYS, SJB, UJB, SJNK, ANGL, BSJG, BSJH, BSJI, QLTC, XOVR.
Monday, Aug 1211:57 AMTaper all but certain amid fixed income excesses
Monday, Aug 1211:57 AM| 3 Comments
- "If Bloomberg reporters see it, so does the Fed," writes Josh Brown, commenting on a story about excesses in fixed-income (AGG. BND).
- So-called covenant-light loan issuance has soared to $155B YTD, beating the 2007 record of $96.6B. Junk bond (HYG, JNK) sales are up 24% YTD vs. the same period a year ago. Sales of payment-in-kind notes (PIK) - in which borrowers pay interest not with cash but with more debt - of $6.5B YTD are on track to top 2012's $8.1B. Bonds sold with the lowest tier CCC rating made up 10.3% of high yield bond YTD, the most since 2011.
- "Taper's a lock folks," concludes Brown ... "And it couldn't come soon enough."
- The 10-year Treasury yield is off 1 basis point today to 2.57%.
- Related ETFs: LAG, SCHZ, BOND, SAGG, MINC,HYG, JNK, PHB, HYLD, HYS, SJB, UJB, SJNK, ANGL, BSJG, BSJH, BSJI, QLTC, XOVR.
Monday, Aug 129:35 AMMoney flows back into corporate debt
Monday, Aug 129:35 AM| Comment!
- Mutual and ETFs (LQD) focused on investment grade corporate debt reported $639M of net inflows last week, the largest gain in over 2 months, according to BAML. In the 10 weeks previous, investors had pulled a net $8.3B out of these fixed-income funds. High yield funds (HYG, JNK) attracted $566M last week.
- The move comes has the IG yield spread to Treasurys has slipped 19 bps since hitting a 9-month high of 172 in late June.
- "There are signs of life," says one fund manager. "People are expecting tapering and are getting out of Treasurys" and into higher yielding assets.
- Other IG bond ETFs: CBND, CORP, FLTR, FLRN, ITR, LWC, SCPB, VCIT, VCLT, VCSH, IGU, IGS, CSJ, QLTA, QLTB, BSCI, BSCJ, BSCK, BSCL, BSCM.
- Other high-yield ETFs: PHB, HYLD, HYS, SJB, UJB, SJNK, ANGL, BSJG, BSJH, BSJI, QLTC, XOVR.
Tuesday, Jul 231:34 PMWith rising rates forcing some issuers out of the market, Moody's expects the U.S. high-yield (HYG, JNK) default rate to rise to 3.2% by November from 2.9% now. It's hardly bad news as that's still well below the 4.5% average since 1993 and the peak rate of 14% in 2009, and Moody's expects the default rate to fall to 2.6% by mid-2014 as issuers return to the market once volatility subsides.
|Tuesday, Jul 231:34 PM| Comment!
Monday, Jul 228:51 AMSet in regulatory motion is the iShares 0-5 year High Yield Corporate Bond ETF which is looking like the High Yield Corporate Bond ETF (HYG), but with shorter duration. The SPDR Short Term HIgh Yield Bond ETF (SJNK) also buys high-yield debt of 0-5 year maturity. |Monday, Jul 228:51 AM| 1 Comment
Wednesday, Jul 103:51 PMYes, there's been a deterioration in underwriting standards in the high yield market (HYG, JNK), writes Scott Minerd, but it's far from pre-crisis excesses and secondary to other concerns - namely higher rates. To protect against rates, he prefers bank loans (BKLN, SNLN) - senior to high yield paper and floating rate. B-rated bank bonds have barely budged since rates began moving higher in May while BB-rated notes (junk) have declined 3.9%. |Wednesday, Jul 103:51 PM| Comment!
Wednesday, Jun 262:48 PMAttempting to answer the question of what the world would look like if the 10-year Treasury yield climbed to 4% while short rates remained about zero, Marty Fridson says spreads on high yield (HYG, JNK) and investment-grade (LQD) corporates would widen to levels seen at the time of the Lehman failure. He's quick to point out this is a stagflation scenario, but if the yields rose because of a booming economy, it would be a different result for corporate paper. |Wednesday, Jun 262:48 PM| Comment!
Friday, Jun 73:20 PMThe rout in junk bonds over the last 5 weeks is well known, but now leveraged loans (BKLN, SNLN) have joined the tumble, notes Barclays. It suggests credit is becoming an issue along with higher rates as leveraged loans are floating rate and would seemingly be unaffected by rising Treasury yields. Also affected are short-term high-yield ETFs: HYS, SJNK. |Friday, Jun 73:20 PM| Comment!
Saturday, Jun 18:48 AMYTD junk bond issuance hits $254B globally, up 53% Y/Y. In the U.S., issuance is up 24% at $130.6B in the first five months of the year and some say the frothy market (see: 5% yield barrier broken) is ripe for a correction. In fact, data suggest cracks are already starting to show in the secondary market: investors pulled a combined $660M from HYG and JNK last week, as fears mount regarding the dreaded "taper". (Previously: Lousy month for high yield; anomalous high yield/ muni spread tightens) |Saturday, Jun 18:48 AM| 1 Comment
Friday, May 313:04 PMA nasty close is in store for a lousy month for high yield (HYG -1%) as it loses some appeal amid now-visible Treasury rates. The yield spread over Treasurys was nearly 500 bps a year ago, but just 400 now. Through yesterday, investors have pulled about $1.5B from HYG and JNK according to IndexUniverse. Not falling as far as the index funds and actually seeing inflows this month is AdvisorShares' actively-managed high yield ETF (HYLD). |Friday, May 313:04 PM| 1 Comment
Friday, May 2411:54 AMA bit of selling by investors in high-yield ETFs (HYG, JNK) has Wall Street banks stepping in - their holdings of junk paper rising 37% to $7.7B in the last 2 weeks. Also at work suggests JPMorgan's team is banks' - used to being cautious the past few years - becoming a little more comfortable with trading activity. |Friday, May 2411:54 AM| Comment!
Thursday, May 2310:12 AMThe ProShares High Yield-Interest Rate Hedged ETF (HYHG) starts trading today joining the likes of HYLS and THHY. The fund will short Treasurys to offset its exposure to high-yield corporate debt and comes with an expense ratio of 0.50% - significantly lower than THHY (1.45%) and HYLS (1.19%). |Thursday, May 2310:12 AM| Comment!
Monday, May 2012:30 PMThe hot market for corporate junk (HYG, JNK) has pushed the yield on high-yield corporates (4.88%) well below that of high-yield municipals (5.22% nominally, over 8% on a tax-equivalent basis). The nominal spread of 34 bps is down from 56 bps a week ago as investors take notice of the anomaly. High-yield muni ETFs: HYD, HYMB, XMPT. |Monday, May 2012:30 PM| 4 Comments
Monday, May 209:47 AMUBS' 5 "suspected" asset bubbles: 1) Risk-free rates - specifically Treasurys (TLT), Bunds (BUND, BUNL), JGBs (JGBL, JGBT, JGBD, JGBS) 2) Credit (HYG, JNK) 3) Real estate in Asia (WPS) 4) Certain EM equity markets (EIDO, IDXJ, EPHE, THD, EWW) 5) Australian banks (WBK, NABZY.PK, ANZBY.PK, CMWAY.PK). |Monday, May 209:47 AM| Comment!
Friday, May 105:57 AMDon't panic, Moody's says, there's "no strong evidence that recent [corporate debt] issuance levels presage a damaging correction." The notion that a bubble is building in the corporate bond market isn't reflected in credit spreads which, for both investment grade (LQD) and high yield (HYG, JNK), are closer to long-run averages than they are to alarmingly tight. Furthermore, the ratings agency says a surge in issuance reflects the "disintermediation of the banking sector" and notes that the proportion of total corporate liabilities comprised of debt securities hasn't significantly increased over the past two years." We can all rest easy now. (previous) |Friday, May 105:57 AM| 2 Comments
Wednesday, May 811:38 AMThe 5% yield barrier on junk bonds (HYG, JNK) is broken for the first time ever, the Barclays U.S. High Yield Index sliding to 4.97% (prior to Jan., the yield had never fallen below 6%). Spreads to Treasurys remain at a not-unreasonable 406 bps, far wider than the record-tight 223 points reached just as the gates of financial heck were about to open in 2007. In the meantime, the equity of highly non-wobbly companies like RDS.A, VOD, and GSK yields in the area of 5%. "We don't want to question the market," writes the FT's David Keohane, "but: what the (heck)?" |Wednesday, May 811:38 AM| 7 Comments