Tag Archives: SPDR Barclays High Yield Bond ETF

This Expert Says: “RISK OFF re High Yield Bond and Utilities ETFs”

MarketsMuse.com update courtesy of coverage by TheStreet.com

Investors should avoid the Utilities Select Sector SPDR ETF (XLU) despite the recent dovish talk by Federal Reserve Chair Janet Yellen, said Mohit Bajaj, Director of ETF Trading Solutions at WallachBeth Capital. Bajaj added that rising rates will hurt the XLU because power companies are levered to debt financing which will become more expensive. He is also bearish on the SPDR Barclays High Yield Bond ETF (JNK) due to the potential for rising rates and problems in the energy sector. On the other hand, Bajaj is bullish on the Financial Select Sector SPDR ETF (XLF) because the large-cap banks will benefit from rising rates and have passed their stress tests. Below is the video interview..

Do Bond ETFs Pose A Systematic Risk? Regulators Confused, Investors Confounded

Index fund managers are finding it challenging to ensure the bonds they need in the prices they want, driving them to make trade-offs that leave supervisors vulnerable in a market downturn and may hurt investors.

Bond liquidity has all but dried up for corporate problems after new regulations and capital requirements compelled Wall Street banks to slash their stocks of fixed income products following the fiscal disaster. That’s especially challenging for index fund supervisors who must get certain bonds to be able to monitor specific standards.

The lack of liquidity additionally means funds could have trouble selling bonds in the event interest rates rise and also the investors who have sunk about $1.2-trillion (U.S.) in net deposits into long-term bond funds since the end of 2004 head for the exits. The Financial Stability Board (FSB) is analyzing whether exchange-traded funds pose a hazard to the global financial system for exactly that reason, in accordance with the Bank of Canada’s representative to the committee. Continue reading