iShares iBoxx High Yield Corporate Bond ETF

HYG tracks a market-weighted index of US high-yield corporate debt.

SPDR Bloomberg High Yield Bond ETF

Investors are dumping corporate Exchange Traded Funds (ETFs) as signs emerge that the Federal Reserve will maintain higher rates for longer because of the stubbornly high inflation in the US. Data by ETF.com shows that the iShares iBoxx USD High Yield Corporate Bond ETF (IYG) has shed over $2.

Corporate bond ETFs HYG and JNK suffer outflows amid Fed jitters

Default rates for high-yield bonds are rising, reaching 4.5% in December 2023. Credit spreads for high-yield bonds are narrowing and currently below historical averages. Risk-adjusted returns for high-yield bonds are weak, treasuries look stronger in this regard.

Three Trends Impacting HYG And High-Yield Bonds

SPDR Bloomberg 1-3 Month T-Bill ETF

VanEck Mortgage REIT Income ETF

Some of the larger, more well-known ETFs have significant drawbacks and stronger peers. These include HYG, BIL, and MORT. A quick explanation of the shortcomings of these ETFs, and some stronger alternatives, follows.

3 ETFs To Avoid, And Their Replacements

Consider hedging with 3–5 year Treasuries, or housing stocks. Option-adjusted high-yield spreads are near all-time lows. Junk bonds are almost as exposed to refinancing risk as much maligned commercial real estate debt.

Short HYG: High-Yield Spreads Are Likely To Widen

First Trust TCW Opportunistic Fixed Income ETF

GS ETF Trust Shs Access High Yield Corp Bond Fund

American Century Multisector Income ETF

RiverFront Strategic Income Fund

Vanguard Intermediate-Term Corporate Bond ETF

Vanguard Long-Term Corporate Bond ETF

In the first quarter of 2024, fixed income investors turned to investment-grade corporate bond ETFs. The Vanguard Intermediate-Term Corporate Bond ETF (VCIT) pulled in $2.3 billion, while the Vanguard Long-Term Corporate Bond ETF (VCLT) added $1.5 billion.

How Much Credit Risk Should You Take On?

As we start a new month, quarter, and week, I want to remind you how I concluded the weekend Daily: “Narratives are not very meaningful if price says something different. We have seen narratives change on a dime as price rules.

Bond Yields and US Dollar Head Higher, Junk Bonds Tumble

The iShares iBoxx $ High Yield Corporate Bond ETF has delivered strong returns in 2023 despite concerns about rising corporate defaults. HYG's strong performance was driven by tightening credit spreads, which are trading near all-time lows. However, all-time low credit spreads do not reflect reality, as actual defaults continue to increase. This signals potential risks for the HYG ETF.

HYG: Mind The Gap Between Defaults And Credit Spreads

Treasury volatility has eased, but varying Treasury and credit returns persist, with only T-bills and junk bonds at total return all-time highs. I have a hold rating on iShares iBoxx $ High Yield Corporate Bond ETF, as credit spreads are historically tight and the HYG fund's YTW has come in significantly. With global defaults on the rise, HYG's fundamental risk/reward setup does not look ideal, though its technical chart is favorable.

High Yield Bonds Hit All-Time Total Return Highs, Weak HYG Risk/Reward

JPMorgan BetaBuilders Europe ETF

Fidelity Wise Origin Bitcoin Fund

iShares Bitcoin Trust

Invesco QQQ

Schwab Short-Term US Treasury ETF

SPDR S&P 500 ETF Trust

ProShares UltraPro QQQ

All 10 spot bitcoin ETFs reported net inflows of $1.6 billion, marking the sixth straight weekly inflow since these launched. According to Freddie Mac, the 30-year fixed-rate average increased for the fourth straight week—the weekly average is currently at 6.94%.

U.S. Weekly FundFlows Insight Report: Short/Intermediate Investment Grade Funds Have Yet To Report A Weekly Outflow In 2024

iShares Core U.S. Aggregate Bond ETF

iShares MSCI Emerging Markets ex China ETF

VanEck Vectors Intermediate Muni ETF

iShares Core S&P 500 ETF

iShares Russell 2000 ETF

iShares iBoxx $ Investment Grade Corporate Bond ETF

Schwab 5-10 Year Corporate Bond ETF

SPDR Nuveen Bloomberg Municipal Bond ETF

Investors were net sellers of fund assets for the second week in three, redeeming a net $11.6B for the LSEG Lipper fund flows week ended Wednesday (February 21). For the flows week, the Treasury yield rose at all maturities of the curve, except for the two-month yield, which experienced a one basis point decline to end the week at 5.50%.

U.S. Weekly Fund Flows Insight Report: Conventional Fund And ETF Investors Give A Cold Shoulder To Equity Funds For The Fund Flows Week

Oaktree Specialty Lending

iShares 0-5 Year High Yield Corporate Bond ETF

SPDR Portfolio High Yield Bond ETF

iShares Broad USD High Yield Corporate Bond ETF

Leading credit investors believe that the case for high-yield bonds remains strong, with a high expected return.

Why High-Yield Bonds Could Outperform: Pick 7.5%-Yielding SPHY

Grayscale Bitcoin Trust

SPDR Portfolio S&P 500 ETF

Consumer Staples Select Sector SPDR Fund

During LSEG Lipper's fund-flows week that ended February 14, 2024, investors were overall net redeemers of fund assets (including both conventional funds and ETFs) for the third week in four, removing a net $918 million.

U.S. Weekly Fund Flows Insight Report: Investors Withdraw Assets From Funds For The Third Week In Four

ARK 21Shares Bitcoin ETF

Bitwise Bitcoin ETP Trust

ProShares Bitcoin Strategy ETF

Vanguard Total Bond Market ETF

VanEck Junior Gold Miners ETF

AdvisorShares Pure US Cannabis ETF

Global X Silver Miners ETF

Amplify Junior Silver Miners ETF

SPDR Portfolio Intermediate Term Corporate Bond ETF

United States Natural Gas Fund LP

Vanguard Long-Term Treasury ETF

Hello! For this week's ETF Wrap, I caught up with Michael Arone, State Street's chief investment strategist, at the Exchange ETF conference in Miami. He shared his take on bonds as ETF investors look for clues as to when the Federal Reserve may cut interest rates.

Why high-yield bond ETFs may deliver ‘surprise' outperformance in fixed income in 2024

iShares Russell 1000 Value ETF

iShares Russell 2000 Value ETF

US Treasury 3 Month Bill Etf

iShares 20+ Year Treasury Bond ETF

Energy Select Sector SPDR Fund

U.S. Weekly FundFlows Insight Report: Equity ETFs Start 2024 With 14th Straight Weekly Inflow

iShares iBoxx $ High Yield Corporate Bond ETF has performed well, generating a total return of 13% since we initiated our bullish view in November 2022. However, we now see increasing risks that market sentiment may be getting ahead of itself and potentially bordering on extreme greed. Fed Funds futures indicate that traders are already pricing a 39% probability of 6 rate cuts (150 basis points) by the end of the year.

HYG: Spreads Near Historic Lows Limit Room For Alpha

Xtrackers USD High Yield Corporate Bond ETF

Bondbloxx USD High Yield Sector Rotation

Schwab High Yield Bond ETF

BondBloxx BB-Rated USD High Yield Corporate Bond ETF

After a year when advisors were relatively cautious about taking on credit risk, sentiment seems to be shifting. In 2023, the most popular fixed income ETF was the iShares 20+ Year Treasury ETF (TLT).

Chart of the Week: High Yield Gaining Traction With Advisors

HYG is the largest high-yield bond ETF in the market. It is not a particularly good choice. A look at the fund, and some better alternatives, follows.

Consider Selling HYG And Buying SPHY Or USHY Instead

Direxion Daily Semiconductor Bull 3x Shares

Direxion Daily Semiconductor Bear 3x Shares

ProShares UltraPro Short QQQ

Financial Select Sector SPDR Fund

High-volume ETFs are more liquid, meaning they can be bought or sold easily without causing a significant price change.

10 Most Actively Traded ETFs of Q4

JPMorgan Equity Premium Income ETF

JPMorgan Nasdaq Equity Premium Income ETF

Kraneshares China Internet And Covered Call Strategy Etf

KraneShares CSI China Internet ETF

ProShares S&P 500 Dividend Aristocrats ETF

SPDR S&P Dividend ETF

"We are absolutely going to see more of these options-based products come to market. We see it in our own book," BNY Mellon's Ben Slavin said.

This ETF offering could become next year's hot product

Blackrock Core Bond Trust

Blackrock Income Trust

BlackRock Credit Allocation Income Trust

BlackRock Enhanced Government Fund

First Trust Mortgage Income Fund

Western Asset Global Corp Defined Opportunity Fund Inc

Western Asset Investment Grade Defined Opportunity Trust

MFS Government Markets Income Trust

MFS Intermediate Income Trust

Western Asset Investment Grade Income Fund

Western Asset Premier Bond Fund

Investment-grade corporate-focused closed-end funds offer attractive fixed-income options with higher yields in the current higher-rate environment. Leverage and discounts/premiums in CEFs add volatility to consider when investing in these funds, which would otherwise be for more conservative investors. Besides the higher yields, when rates decline investment-grade funds should see a significant rebound, adding a catalyst for potential upside and 'locking in' higher yields now.

Closed-End Funds: Investment-Grade Corporate Fixed-Income Exposure To Consider

SPDR Dow Jones Industrial Average ETF

ATAC US Rotation ETF

ProShares UltraShort 20+ Year Treasury

The market may have peaked in July due to the lagged effects of the fastest rate hike cycle in history. A credit event is likely to occur, starting with treasuries and then moving to corporate credit, junk debt, and highly levered companies.

Credit Event: Phase 2 - Michael Gayed

Vaneck CLO ETF

Panagram AAA CLO ETF

Janus Henderson AAA CLO ETF

Fixed income ETF demand has been strong in 2023 led by Treasury ETFs. However, advisors have been rewarded by turning to alternatives in the fixed income space, such as those focused on the collateralized loan obligations (CLOs) market.

How CLOs Can Provide an Alternative to Traditional Bond ETFs

Goldman Sachs TreasuryAccess 0-1 Year ETF

iShares 0-3 Month Treasury Bond ETF

Equity markets traded slightly up, while short-term Treasury yields increased by more than 2.0%. After logging a record-breaking weekly inflow last week, high-yield ETFs posted their second-largest weekly inflow. Short/intermediate investment grade funds have seen 10 straight weekly outflows while recording three consecutive weekly gains.

U.S. Weekly FundFlows Insight Report: After Record-Breaking Week, High Yield ETFs Follow-Up With Second-Largest Weekly Intake On Record

Ishares High Yield Corporate Bond Buywrite Strategy ETF

iShares Ibonds Dec 2032 Term Corporate ETF

Ishares Investment Grade Corporate Bond Buywrite Strategy ETF

iShares MSCI USA Quality Factor ETF

iShares 20+ Year Treasury Bond BuyWrite Strategy ETF

The U.S. ETF industry continues to evolve. In the first 10 months of 2023, fixed income ETFs gathered more than 40% share of the net inflows, despite representing just 20% share of the market.

Recapping BlackRock's Strong Fixed Income Flows

iShares 7-10 Year Treasury Bond ETF

iShares National Muni Bond ETF

Vanguard Tax-Exempt Bond Index ETF

Trading activity on the Tradeweb European ETF marketplace reached EUR 52.4 billion in October, while the proportion of transactions processed via the AiEX tool was 83%. North America Equities were once again the most heavily-traded ETF category, with EUR 9.5 billion in total notional volume, of which 60% was attributed to ‘buys'. Total consolidated U.S. ETF notional value traded in October amounted to a record USD 71.1 billion, beating the platform's previous best performance in March 2023 by USD 3.8 billion.

Tradeweb Exchange-Traded Funds Update - October 2023

News for iShares iBoxx High Yield Corporate Bond ETF ETF (HYG)