As noted in our ETF/Index Options recap today, we have seen some interest in October downside puts in the largest “Junk Bond” ETF in the marketplace, iShares iBoxx $ High Yield Corporate Bond (NYSE:HYG) (Expense Ratio 0.49%, $17.8 billion in AUM).
While the trading has not been in immense size as of yet, on a quiet tape the activity still catches our attention, primarily since HYG has rallied the past couple sessions back above its 50 day MA after faltering several times earlier in August. Year-to-date, the fund has struggled a bit in terms of asset flows, with over $1 billion leaving the door via redemption pressure, while competing ETF the $11.7 billion SPDR Barclays High Yield Bond (MX:JNK) (NYSE:JNK) (Expense Ratio 0.40%) has had similar luck (losing $630 million YTD).
Even with the rally in bond prices the past couple sessions, HYG is about 1.2% off of its 52-week high at present levels, and when one looks at a six month chart we can see the tremendous rally that Corporate Bond prices had (amid a steep fall in yields) since the end of March of this year. Note that the current yield in HYG is 5.03%, and 5.62% in JNK, which are historically very low levels.
There are actually five other “High Yield Bond” or “Junk” funds out there, including SPDR Barclays Short Term High Yield Bond (NYSE:SJNK) (Expense Ratio 0.40%), iShares 0-5 Year High Yield Corporate Bond (NYSE:SHYG) (Expense Ratio 0.30%), PIMCO 0-5 Year High Yield Corporate Bond (NYSE:HYS) (Expense Ratio 0.55%), First Trust Tactical High Yield (NASDAQ:HYLS) (Expense Ratio 0.95%), and PowerShares amental High Yield Corporate Bond Portfolio (NYSE:PHB) (Expense Ratio 0.50%), which have north of $1 billion in assets in addition to HYG and JNK in the U.S. listed landscape, so clearly there is immense investment interest across both institutional and retail ETF investors in this space.
With 1,029 individual bond holdings currently, it is interesting to see which industry sectors are currently at the top end of the portfolio in terms of weightings in the “Junk” space. Presently we see exposures as follows: Communications (25.09%), Consumer Staples (13.57%), Consumer Discretionary (13.03%), Energy (12.40%), and Technology (7.88%).
The iShares iBoxx $ High Yield Corporate Bond ETF was trading at $87.95 per share on Thursday afternoon, up $0.02 (+0.02%). Year-to-date, HYG has gained 4.27%, versus a 10.31% rise in the benchmark S&P 500 index during the same period.
HYG currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #1 of 39 ETFs in the High Yield Bond ETFs category.