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Investors are returning to the bond market in force, driving fixed-income ETFs toward another record year as higher yields make bonds attractive for income-seeking investors once again.
While April was a tough month for the U.S. high yield market, May was a different story altogether. BondBloxx's latest Fixed Income Market Commentary highlighted the strong rebound for high yield bonds in May, bolstered from good earnings and “the largest retail inflows into the asset class this year.
The outlook for U.S. high yield fixed income may be more constructive than investors realize. High yield is well-known for being riskier than other segments in the fixed income market; however, strong corporate fundamentals have strengthened the integrity of the asset class.
High yield continues to live up to its name. In fact, it was the only major fixed income asset class to generate positive performance in August.
Issuers of high yield bonds remain resilient going into the second half of 2023, with their balance sheets still well-positioned. And according to BondBloxx, the credit quality breakdown within high yield remains better than before previous downcycles.
The prospect for income generation in high yield ETFs has increased significantly with the past year's run-up in yields. But when targeting high yield, investors should be shrewd and selective when picking their entry points.
At a time when equity markets are continuing to wobble, high-yield bonds are currently benefiting from elevated coupon income and are less risky than equities in the current economic environment. The latest rate hike from the Federal Reserve has also contributed to an environment in which high-yield bond funds have become increasingly attractive to investors.
High yield is really living up to its name. An Ice Data Services index shows that yields on so-called domestic junk bonds have risen to nearly 8.6% from a mid-August low of 7.4%, reflecting a substantial price drop.
SEC filings for XB aren't indexed yet — common for recently launched funds. Browse the issuer's filings on SEC EDGAR directly.