Tag Archives: high yield bond ETFs

Bull Week For High Yield Bonds, Thanks To ETFs

MarketMuse blog update profiles the positive market conditions bringing a good cash flow to high yield bonds, some say both are due to the ETF market. MarketMuse blog update is courtesy of Forbes’ article “High Yield Bond Funds See $315M Cash Inflow, Thanks To ETFs” with an excerpt below. 

Retail cash flows for U.S. high-yield funds were positive $315 million for the week ended April 1, down from positive $856 million last week, according to Lipper. Both were essentially all related to the exchange-traded-fund segment, with this week’s ETF inflow of $318 million dented by a small, $3 million outflow from mutual funds.

The two-week inflow total of approximately $1.2 billion follows two weeks of outflows totaling $3 billion in mid-March. Those were the first outflows after six weeks of heady inflows.

Even with the fresh inflow this week, the trailing-four-week average holds fairly steady, at negative $446 million per week, from negative $448 million per week last week, as an inflow five weeks ago was essentially the same as this week’s inflow. Recall that the trailing-four-week reading of positive $2.5 billion seven weeks ago was the largest in this measure on record.

To read the full article from Forbes, click here.

Turm- Oil: Black Gold Turns to More than 50 Shades of Gray for High Yield Bond ETFs

MarketsMuse update on the downtick in oil prices and impact on high yield bond ETFs, including energy-sectory junk bonds includes extract from Institutional Investor Jan 7 coverage by Andrew Barber.

MarketsMuse editor note: The recent implosion of crude oil prices has triggered a conundrum for almost every investment analyst who prides themself on pontificating the domino effect impact on the broad universe of market sectors and asset classes. Much has been said about the how, when and where the trickle-down effect of the lower oil prices will effect corporate balance sheets, and in particular, those with a boatload of outstanding debt.  For high-grade corporate debt issuers, some believe lower energy costs bode will. For high yield bond issuers (companies that typically include energy industry players), the jury remains out for the most part. Experts that MarketsMuse has spoken with believe that if US drillers and frakers cut back on operations and reduce overhead quickly, it will help stem the burn that inevitably results from manufacturing a product that costs almost as much (if not more) to make as it what customers pay for it. Then again, as the supply begins to wane consequent to production cutbacks, market forces will, in theory, cause prices to rise..and those companies will be back in the black before having to sweat too much about interest payments on outstanding debt.

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II’s coverage on the topic is framed nicely via this extract:

mcormond jan15 The impact of rising yield for energy producers on high yield markets has also spilled over into the exchange-traded funds and closed-end funds. “ETFs create a simple wrapper for investors to modify easily their exposure to high yield fixed income markets” says Andy McOrmond, managing director at WallachBeth Capital, a New York-based institutional brokerage that focuses on ETF and portfolio trading. Mohit Bajaj, director of ETF trading solutions, also at WallachBeth, notes that despite the volatility injected into the market for high-yield exchanged-traded products during the recent oil sell-off, short interest has remained relatively stable and borrows have been easily obtainable. Bajaj attritubes this stability to a maturing institutional appreciation of exchange-traded fund products.

 

For the full article from II, please click here

 

High-Yield ETFs Lure Investors Bypassing Dealers: Credit Markets

 

reporting from Lisa Abramowicz

Exchange-traded funds that own junk bonds are attracting unprecedented sums of cash from institutional investors seeking to slip in and out of the market as dealer inventories decline.

Institutional holders own 51 percent of BlackRock Inc.’s high-yield ETF, up 11 percentage points this year, according to data compiled by Bloomberg. The portion at State Street Corp. (STT)’s fund has grown to 60 percent, a rise of 18 percentage points.

The two funds, which allow individual investors access to the junk-bond market for as little as $37.59 a share, are attracting buyers from Bank of America Corp. (BAC) to Northern Trust Corp. as primary dealers gut corporate bond holdings by 81 percent since 2007. The market shift was underscored last month, when an investor redeemed as much as $780 million shares in State Street’s fund for the equivalent amount of bonds.

“Liquidity is the main reason that we’re using high-yield ETFs right now rather than high-yield bonds,” Tim Anderson, chief fixed-income officer at RiverFront Investment Group LLC in Richmond, Virginia said in a telephone interview. “In the good old days you could call up one of the major firms and there’d be a halfway decent shot you could sell $15 million, $30 million of bonds to them on the line,” said Anderson, whose firm is the sixth-biggest institutional shareholder in State Street’s fund. “They’re not keeping the same inventories anymore.”

“ETFs have increasingly become a more viable way to express credit views,” said Eric Gross, a credit strategist at Barclays Plc in New York. “We’ve seen corporate bond liquidity go down across both investment grade and high yield.”

“As long as something like JNK or HYG is easy to trade and relatively liquid, I’m not sure why anyone would go through the hassle of chasing down all the bonds, unless they were very good at doing it,” said Chris Hempstead, director of ETF execution at WallachBeth Capital LLC in New York. “It may be an affordable way to get exposure to the bonds.” Continue reading