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An Unknown ETF Investors Should Know About: Part 3Brad Kenagy • Oct. 28, 2013
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IHY vs. ETF Alternatives
The Market Vectors International High Yield Bond ETF (IHY) seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the The BofA Merrill Lynch Global ex-US Issuers High Yield Constrained Index (HXUS), which is comprised of below investment-grade debt issued by corporations located throughout the world (which may include emerging market countries) excluding the United States denominated in Euros, U.S. dollars, Canadian dollars or pound sterling issued in the major domestic or Eurobond markets.
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Wednesday, Mar 1212:49 PM
Wednesday, Mar 1212:49 PM| Comment!
- Building on the success on the SPDR Barclays High Yield Bond ETF (JNK), State Street Global Advisors will roll out the SPDR Barclays International High Yield Bond ETF (IJNK) tomorrow.
- Much like JNK, IJNK will track an index of high yielding corporate bonds, but with a focus on ex-U.S. global market.
- This market sector is relatively under represented in the ETF universe and the addition of IJNK will round out SSgA's exposure to high yielding bonds.
- Other high yielding global corporate bond ETFs: IHY, HYXU, PGHY
Tuesday, Mar 111:37 PM
Tuesday, Mar 111:37 PM| Comment!
- High-yield investors should take little comfort from a low default rate (with most forecasting for that to continue), says Martin Fridson, reminding the default rate in 2007 was 0.975%, but junk suffered a 5.6% price drop that year.
- The commonly held belief that high-yield total return equals yield minus default loss is "essentially irrelevant over a one-year horizon" in that it assumes the bonds which default in any given year began the year at par. In truth, the vast majority of any year's defaults began the year as distressed paper with spreads to Treasurys of 1K basis points or more.
- "Investors are ill-served by overly simplistic analysis implying that mid-double-digit returns are a sure thing as long as the default rate remains below average. The high-yield market has proven that it is quite capable of generating substantial price declines even in the face of extremely low default rates and declining Treasury yields."
- Yesterday: Junk-bond default rate slides to just 1.6%.
- ETFs: HYG, JNK, HYLD, HYS, SJNK, PHB, BSJF, SJB, BSJE, BSJG, HYHG, HYEM, IHY, EMHY, BSJI, HYXU, ANGL, PGHY, BSJH, HYLS, XOVR, THHY, UJB, QLTC, SHYG, BSJK, HYZD, BSJJ, HYND
Monday, Mar 101:01 PM
Monday, Mar 101:01 PM| Comment!
- February's 1.6% is off from an already-low 1.9% in January, but Moody's see it rising to 2.3% by year's end. The historical average since 1983 is 4.7%. Globally, the default rate fell to 2.4% in February from 2.6% previously, and Moody's sees a further decline this year to 2.1%.
- The default rate better stay low - the junk market yields just 5.34% on average and the spread to Treasurys is 379 basis points per the BAML benchmark index, right near a post-crisis low.
- ETFs: HYG, JNK, HYLD, HYS, SJNK, PHB, SJB, HYHG, IHY, HYXU, ANGL, PGHY, HYLS, XOVR, THHY, UJB, QLTC, SHYG, HYZD, HYND
Tuesday, Feb 184:53 AM
Tuesday, Feb 184:53 AM| Comment!
- U.K. inflation has fallen below the Bank of England's target of 2% for the first time since November 2009, dropping to 1.9% on year in January from 2% in December and undershooting consensus that was also 2%.
- On month, CPI exhibited deflationary tendencies, declining 0.6% vs a rise of 0.4% previously and consensus of -0.5%.
- Core CPI +1.6% on year vs +1.7% and +1.9%.
- The fall in inflation was due to lower prices for recreational goods & services, furniture & household goods and alcoholic beverages & tobacco. These factors were partially offset by increases for miscellaneous goods and services. (PR)
- Factory output prices (PPI) fell 0.3% on month vs flat and +0.1%. (PR)
- The pound slides vs the dollar and is -0.3% at $1.6664, while the FTSE 100 is -0.2%.
- ETFs: FXB, EWU, GBB, IHY, HYXU, EWUS, PGHY, FKU, DXPS, DBUK
Tuesday, Nov 122013, 3:52 PM
Tuesday, Nov 122013, 3:52 PM| 9 Comments
- Beginning in 2016, Fridson sees the high-yield default rate averaging 8.4% over the following four years - this compares to the long-run average of 4.5% and the current rate of just 2.5%. Putting those numbers in perspective, it means the number of issuers defaulting will be triple that during the 2008-09 crisis, and double the number defaulting in the 5-year surge beginning in 1999.
- For those who have bid up junk bond prices to an average of 103.2 cents on the dollar, the average yield down to 5.8%, and remain focused on interest rate risk instead of credit risk ... you've been warned.
- Related ETFs: HYG, JNK, BKLN, HYS, HYLD, SJNK, PHB, BSJF, SRLN, SJB, SNLN, BSJE, BSJD, IHY, FTSL, ANGL, BSJI, BSJG, HYXU, PGHY, XOVR, UJB, BSJH, QLTC, SHYG, BSJK, BSJJ
Wednesday, Sep 252013, 7:06 AM
Wednesday, Sep 252013, 7:06 AM| Comment!
- Simon Property Group (SPG) is the latest in a string of issuers raising money in European debt markets as the yield discount to U.S. paper nears its widest in 4.5 years. Simon is selling €750M of seven-year notes yielding 75 bps over swaps, about 122 bps better than it could get in the States.
- Behind the widening is monetary policy - the Fed is making noises about pulling back from stimulus, while the ECB isn't yet close to that point.
- U.S. high yield ETFs: HYG, JNK, PHB, HYLD, HYS, SJB, UJB, SJNK, ANGL, BSJG, BSJH, BSJI, QLTC, XOVR.
- Int'l high yield: IHY, HYXU, PGHY.
- U.S. investment grade ETFs: U.S.: LQD, CBND, CORP, FLTR, FLRN, ITR, LWC, SCPB, VCIT, VCLT, VCSH, IGU, IGS, CSJ, QLTA, QLTB, BSCI, BSCJ, BSCK, BSCL, BSCM.
- International investment grade: PICB, IBND, IBCB, IBCC, IBCD, IBCE, IBDA, IBDB, IBDC, IBDD.
Saturday, Aug 42012, 9:44 AMFocused on what ECB action may be on sovereign debt, markets are underpricing the chance the central bank steps into corporate bonds, opine two Goldman strategists. Measures could include direct purchases of corporate paper or a "funding for lending" scheme (a la the BOE). The moves would allow the ECB to provide market support without violating its mandate against financing of governments. |Saturday, Aug 42012, 9:44 AM| 9 Comments
Tuesday, Jul 242012, 1:33 PMEuropean high-yield investors don't know from troubles there, ahead by 12% YTD with stocks in the tank, writes James Tomlins. He believes a world of microscopic rates, slow growth, and deleveraging has altered correlations, allowing high-yield to perform even as returns to shareholders lag. |Tuesday, Jul 242012, 1:33 PM| 2 Comments
Thursday, Jun 72012, 2:36 PMWhen life deals you lemons ... banks (particularly European ones) cutting back lending activity in Asia is leading to a ramp in the development of the corporate bond market there. Companies (ex-Japan) issued $398B in bonds last year, up 29% Y/Y as syndicated bank loans dove 44%. |Thursday, Jun 72012, 2:36 PM| Comment!