Weird Bond ETF Picks Market Vectors Fallen Angel Bond ETF (ANGL)
Bond ETF Yield: 5.84%
Just like people, companies have “credit scores.” And just like you or I, various issues can affect those debt ratings.
Firms that have run into trouble and seen their debt rating fall from investment grade to junk status often face higher borrowing costs and bigger coupon payments on their bonds. For investors, it can be an opportunity to pick up some extra yield without adding that much more risk.
These bonds are called “Fallen Angel” debt and the Market Vectors Fallen Angel HY Bond ETF (ANGL) is the only fund that tracks these former investment grade bonds.
The bulk of the holdings in this bond ETF are rated BB, or just one notch below investment grade. That means the 93 different now-junk bonds in ANGL are actually pretty strong bonds. Issuers range from British investment bank Barclays PLC (BCS) and telecom CenturyLink (CTL). These aren’t necessarily the highest-risk companies and many have vast global sales networks.
In exchange for moving slightly down the credit ladder, ANGL investors are treated to a 5.84% distribution yield, while the duration is right in the sweet spot to battle rising rates. This bond ETF should definitely be on your radar.
As of this writing, Aaron Levitt did not hold a position in any of the aforementioned securities.