SPDR Barclays High-Yield Bond ETF
The aptly tickered SPDR Barclays High-Yield Bond ETF (JNK) invests in corporate bonds that are rated below investment grade. The ETF has a whopping $12 billion in assets under management, offers a current yield of 6.7% and charges 0.4% in expenses.
Pros: For investors seeking yield, JNK is worth considering. A junk-bond ETF allows investors to diversify among a large number of bond issues, potentially mitigating the risk of buying individual bonds. JNK has delivered a three-year return of about 10%, and despite the ETF’s recent volatility, the longer-term outlook for this asset class remains bright.
Cons: High-yield ETFs like JNK have been hammered harder than their sector peers — the ETF is down nearly 6% this month alone. Options traders also are betting against JNK — during the past month, options volume in JNK was four times average, with bearish puts outpacing calls by 11-to-1.
Verdict: The selloff in JNK likely has not found its bottom yet, so a better deal might be available in a week or two. Still, JNK is in oversold territory now, presenting a potential opportunity for investors looking for yield, but unwilling to chase it.