PIMCO 0-5 Year High Yield Corporat Bond Index Exchange-Traded Fund (ARCA: HYS)

PIMCO 0-5 Year High Yield Corporat Bond Index Exchange-Traded Fund (ARCA:HYS), Trade Ideas

PIMCO 0-5 Year High Yield Corporat Bond Index Exchange-Traded Fund

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Why You Should Steer Clear Of Junk Bond ETFs

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Analyst Ratings

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ISTB

SJNK

Ratings Matter For Bond ETFs, Too

Is Carl Icahn Right About The High-Yield Market?

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Junk bond ETFs have been suffering of late as investors in the United States have been shunning the high-risk segments of the domestic debt markets. Moreover, the recent fund flow reflects the shift in sentiment among investors and how they are adapting to changing circumstances.
What&#39;s Driving the ETFs?
The first quarter was dismal for the U.S. markets. Moreover, Wall Street saw a glum start to the second quarter, thanks to continued pessimism in the market. Although stocks grabbed most of investor attention, high yield credit also saw some loss in favor.
After a correction in early February owing to interest rate and inflation fears, markets recovered some of its losses to end the month on a slightly better note. However, March was not favorable for markets across the globe, as fresh trade war fears started affecting markets.
The recent market turmoil has been strongly weighing on investors&#39; risk appetite and making them reallocate their portfolios. The volatility has forced investors to safeguard their portfolios by allocating money to safer assets, in the event of a potential market breakdown.
Moving on to interest rates, the Federal Reserve hiked interest rates by 25 basis points in Powell&#39;s first meeting as chairman. The new benchmark funds rate was raised to 1.5% to 1.75% in March. Per the CME Fed watch tool, two more hikes are expected in 2018. This might lead to higher bond yields and lower bond prices, as the spread over treasuries decline.
Per an etf.com article citing FactSet <a href="http://www.etf.com/sections/features-and-news/bond-etf-flows-shift-safety?nopaging=1">data</a>, passively managed high-yield ETFs witnessed $5.4 billion in outflows in the first quarter of 2018. Moreover, owing to fears of rising rates, investors are flocking to duration hedged ETFs. Per FactSet data, duration-hedged ETFs received $509 million in the first quarter.
Below we discuss a few ETFs that seek to provide exposure to the high-yield space.
iShares iBoxx High Yield Corporate Bond ETF&nbsp;(NYSE: <a class="ticker" href="/stock/hyg#NYSE">HYG</a>)
This fund has AUM of $15.1 billion and seeks to provide exposure to high-yield bonds. It charges 49 basis points as fees per year. From a sector look, Communications, Consumer Non-Cyclical and Energy are the top allocations of this fund, with 23.4%, 13.9% and 13.8% exposure, respectively. The fund targets the short-to-intermediate end of the yield curve as it has a weighted average maturity of 4.79 years and an effective duration of 3.85 years. The fund has lost 1.1% year to date but returned 2.5% in a year. It has a Zacks ETF Rank #4 (Sell) with a High risk outlook.
SPDR Bloomberg Barclays High Yield Bond ETF&nbsp;(NYSE: <a class="ticker" href="/stock/jnk#NYSE">JNK</a>)
This fund has AUM of $8.8 billion and seeks to provide exposure to high-yield bonds. It charges 40 basis points as fees per year. From a sector look, Industrial, Finance and Utility are the top allocations of this fund, with 86.7%, 9.2% and 3.1% exposure, respectively. The fund targets the short-to-intermediate end of the yield curve as it has an average maturity of 6.16 years and option-adjusted duration of 4.06 years. The fund has lost 1.4% year to date but returned 2.7%in a year. It has a Zacks ETF Rank #4 with a High risk outlook.
PIMCO 0-5 Year High Yield Corporate Bond Index Fund&nbsp;(NYSE: <a class="ticker" href="/stock/hys#NYSE">HYS</a>)
This fund has AUM of $1.6 billion and seeks to provide exposure to high-yield bonds. It charges 55 basis points as fees per year. From a sector look, High Yield Credit, Investment Grade Credit and U.S. Government-Related are the top allocations of this fund, with 97.9%, 1.2% and 0.6% exposure, respectively. The fund targets the short end of the yield curve as it has a weighted average maturity of 3.24 years and an effective duration of 2.09 years. The fund has returned 3.6% in a year. It has a Zacks ETF Rank #4 with a High risk outlook.
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Analyst ratings are not always perfect, but there are some indications that some research is getting it right <a href="https://www.benzinga.com/analyst-ratings/analyst-color/17/02/9038723/ratings-matter-for-some-etfs">when it comes to exchange traded funds</a>.
That applies to fixed-income ETFs, too, one of the fastest-growing segments of the ETF space. On a global basis in January, bond ETFs saw inflows of $16.6 billion with $13.6 billion of that being allocated to US-listed bond ETFs. That was the best month of bond ETF inflows since February 2015.
<h3>Fixed-Income ETFs</h3>
Investors affinity for fixed-income ETFs in January came after they poured $92 billion into the asset class last year, a record for a single year. In a note out Tuesday, <a href="https://www.cfraresearch.com/">CFRA Research</a> highlighted the 2016 performance of the bond ETFs the research firm rates Overweight. Following those ETFs proved rewarding.
&ldquo;In 2016, the Overweight ranked fixed income ETFs had a 3.23 percent total return, ahead of the 2.65 percent of the aggregate index. While the Underweight ranked ETFs gained 3.78 percent, those ETFs have lagged over the longer-term. Our least favored ETFs lost 0.40 percent on a three-year annualized basis, underperforming the 2.96 percent total return for the index. In contrast, Overweight ETFs gained 3.45 percent,&rdquo; said CFRA.
Related Link: <a href="https://www.benzinga.com/analyst-ratings/analyst-color/17/02/9038723/ratings-matter-for-some-etfs">Ratings Matter For Some ETFs</a>
The performance of CFRA&#39;s Overweight bond ETFs topped the average return of 2.45 percent generated by the iShares Core U.S. Aggregate Bond ETF (NYSE: <a class="ticker" href="/stock/agg#NYSE">AGG</a>) and the Vanguard Total Bond Market ETF (NYSE: <a class="ticker" href="/stock/bnd#NYSE">BND</a>) last year.
The iShares Core U.S. Aggregate Bond ETF (NYSE: <a class="ticker" href="/stock/istb#NYSE">ISTB</a>) has an effective duration of less than three years, putting investors at the shorter end of the curve for a low fee of just 0.08 percent per year. ISTB has a 30-day SEC yield of 1.9 percent.
<h3>Other Options</h3>
Investors looking for more yield without the duration risk of traditional junk bond ETFs can tap the PIMCO 0-5 Year High Yield Corporate Bond ETF (NYSE: <a class="ticker" href="/stock/hys#NYSE">HYS</a>) and the SPDR Bloomberg Barclays Short Term High Yield Bond ETF (NYSE: <a class="ticker" href="/stock/sjnk#NYSE">SJNK</a>).
SJNK has a modified adjusted duration of just 2.2 years with a tempting 30-day SEC yield of 5.2 percent.
&ldquo;Investors who want to earn a higher yield, while taking on limited interest rate risk, have some strong, yet more expensive, ETFs to consider. Both SPDR Bloomberg Barclays Short Term High Yield (SJNK) and PIMCO 0-5 Year High Yield Corporate Bond Index ETF (HYS) earn top rankings from CFRA due to their high 30-day SEC yields and moderate duration, which offset a negative input for credit risk. HYS has a higher expense ratio (0.55 percent vs. 0.40 percent) than SJNK, but has slightly less exposure to bonds rated CCC or lower. The 72-basis point performance difference in 2016 between these ETFs is a reminder that products that sound the same are often not the same,&rdquo; noted CFRA.
HYS, ISTB and SJNK are rated Overweight by CFRA.

It&rsquo;s no secret that everything Carl Icahn says seems to send tremors through the finance sphere.

	His latest insight? At CNBC&rsquo;s Delivering Alpha conference last week, he revealed he&rsquo;s bearish on <a href="http://www.benzinga.com/markets/bonds/15/07/5675932/what-worries-carl-icahn-a-trillion-dollar-junk-bond-crisis">high-yield debt</a>, warning increased interest rates at the end of the year that could cause a sell off and crash.
<h3>
	What Are Junk Bonds?</h3>

	Junk bonds are pretty risky to deal with.

	The term &ldquo;junk bond&rdquo; refers to a high-yield bond or non-investment grade bond that can be corporate or government bonds. They are lower rated and have high-default risks. Yet, they are attractive because they offer greater yields than less risky bonds.

	As the yield increases, price decreases, and vice versa.

	While government bonds are safer because you can ride out the bond until expiration and get your money back, corporate bonds can default and all you can do is wait to see if it goes back up. ETFs like iShares iBoxx $ High Yid Corp Bond ETF (NYSE: <a class="ticker" href="/stock/hyg#NYSE">HYG</a>) are risky in this way as well, since you can&rsquo;t wait until the bond expires.
<h3>
	Waiting On Interest Rates...</h3>

	Getting back to Carl Icahn: Last week, he even speculated that this crash could kill the market like in 2008.

	Others say that this warning against buying bonds is a recurring trend that has <a href="http://www.nytimes.com/2015/01/03/your-money/asset-allocation/for-bond-investors-ignoring-expert-advice-has-been-profitable.html?_r=2">never really played out</a>.

	The past few years we&rsquo;ve heard warnings of higher interest rates, spikes in inflation, and that if you buy bonds, you&rsquo;ll end up losing a lot of money.

	Yet, over the past few years, people have managed to make money in the bond market. The higher rates haven&rsquo;t happened just yet.

	Data from the CME predicts there&rsquo;s an 80% that the Federal Reserve will <a href="http://www.benzinga.com/economics/15/06/5603189/fed-rate-hike-on-hold-heres-the-probability-of-a-25-basis-point-hike-out-to-">raise rates</a> in December of 2015, while others speculate it will hold off until 2016.
<h3>Percent Probability Of A Fed Rate Hike:</h3>


	<img alt="" src="/files/images/2015/July/22/capture_0.png" style="width: 772px; height: 251px;" />

	<a href="http://marketfy.com/portal/eagle-bay-solutions/">Eagle Bay Capital</a> Founder JC Parets told us he doesn&rsquo;t think interest rates are going anywhere this year.

	&ldquo;My entire life interest rates have been going down and then you just have this media obsession with when rates are going up and I&rsquo;m really not sure why everyone is in such a rush.&rdquo; Parets said. &ldquo;Historically a bottoming out of interest rates takes 10-15 years and we just hit new lows in interest rates so why should we expect this?

	Parets suggested ignoring economists and focusing on the charts and markets for when interest rates will actually rise. As of now, he expects the probability of hike to continue decreasing.
<h3>
	Word On The Street</h3>

	The truth about the high-yield bond market is that it is very large and diverse. It&rsquo;s difficult to make a sweeping generalization about the whole market which involves different sectors, qualities, and durations.

	Andrew Toburen, senior portfolio manager at Chartwell Investment Partners, said in an interview with <a href="http://www.thestreet.com/story/13224335/1/chartwell-portfolio-manager-still-likes-high-yield-bond-funds.html">TheStreet.com</a> that while investors should be cautious right now in lower quality CCC in energy and metals, higher quality BB and B rated bonds in retail and service are attractive and safe.

	Pimco&rsquo;s Chief Investment Officer, Mark Kiesel, told <a href="http://www.cnbc.com/2015/06/24/high-yield-bond-market-not-at-risk-pimco-cio.html">CNBC</a> that while he doesn&rsquo;t foresee a crisis, it&rsquo;s important to be conservative and avoid lower-quality, high-yield bonds.

	Josh Brown, a financial advisor at Ritholtz Wealth Management, told <a href="http://www.usatoday.com/story/money/2015/07/19/carl-icahn-larry-fink-faceoff/30244499/">USA&nbsp;Today</a> that if there really was a crash &ndash; it wouldn&rsquo;t matter if you owned bonds or not&ndash;we would all get hurt.
<h3>
	What To Watch</h3>

	If you&rsquo;re interested in following the bond market, here are a few ETFs to follow:

	iShares iBoxx $ HY Corp Bond Fund ETF (NYSE: <a class="ticker" href="/stock/hyg#NYSE">HYG</a>) 5 year chart:

	<img alt="" src="/files/images/2015/July/22/screen_shot_2015-07-21_at_4.24.00_pm.png" style="width: 477px; height: 319px;" />

	SPDR Barclays Capital High Yield Bond ETF (NYSE: <a class="ticker" href="/stock/jnk#NYSE">JNK</a>) 5 year chart:

	<img alt="" src="/files/images/2015/July/22/screen_shot_2015-07-21_at_4.26.18_pm.png" style="width: 480px; height: 324px;" />

	PIMCO 0-5 Year High Yield Corporate Bond Index Fund ETF (NYSE: <a class="ticker" href="/stock/hys#NYSE">HYS</a>) 5 year chart:

	<img alt="" src="/files/images/2015/July/22/screen_shot_2015-07-21_at_4.27.15_pm.png" style="width: 473px; height: 328px;" />

	JC Parets is also a technical analyst with more than a decade&rsquo;s worth of experience. He told us that when looking at high-yield bonds as a group -- like with the iShares iBoxx $ High Yid Corp Bond ETF (NYSE: <a class="ticker" href="/stock/hyg#NYSE">HYG</a>) -- he would be a seller of strength particularly toward $90.

	&ldquo;But you also want to look at the high-yield market relative to the U.S. Treasury. So you have guaranteed government bonds, and essentially comparing them to the junk and treasuries -- continue to outperform,&rdquo; Parets said. &ldquo;I think that ratio continues to get better. I think you keep buying treasuries on their own and I think you can short the high-yield against it also.&rdquo;

	You can read more about what Carl Icahn said <a href="http://www.benzinga.com/markets/bonds/15/07/5675932/what-worries-carl-icahn-a-trillion-dollar-junk-bond-crisis">here</a>.

High-yield bonds, otherwise known as <a href="http://www.benzinga.com/topic/junk-bonds">junk bonds</a>, have traveled an arduous path over the last twelve months. These decidedly sensitive credit securities fell out of favor in the fourth quarter of 2014 as fears over wavering stock gains spilled over into riskier fixed-income assets.

	Nevertheless, junk bond ETFs have defied expectations by pressing higher over the last four months and recently broke out to new 52-week highs.
<h3>High-Yield Bond ETF Barometer</h3>
	The iShares iBoxx $ High Yid Corp Bond (ETF) (NYSE: <a class="ticker" href="/stock/hyg#NYSE">HYG</a>) is the largest barometer of high-yield credit in this space, with over $17.6 billion in total assets. HYG invests in over 1,000 individual securities of below-investment grade companies such as T-Mobile US Inc (NYSE: <a class="ticker" href="/stock/tmus#NYSE">TMUS</a>) and Ally Financial Inc (NYSE: <a class="ticker" href="/stock/ally#NYSE">ALLY</a>).
<bzrelatedlink>Related Link: <a href="http://www.benzinga.com/opinion/15/04/5410737/interview-with-mark-okada-of-highland-capital">Interview With Mark Okada Of Highland Capital</a></bzrelatedlink>
	Since the beginning of the year, HYG has gained 3.43 percent and attracted more than $2.9 billion in new assets.

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	This trend clearly shows that investors are hungry for yield and willing to bet on the strength of U.S. companies to enhance their income streams. HYG has a current 30-day SEC yield of 5.18 percent, an effective duration of 4.00 years and charges an expense ratio of 0.50 percent.
<h3>SPDR Junk Bond ETF</h3>
Another well-known fund in this space is the SPDR Barclays Capital High Yield Bnd ETF (NYSE: <a class="ticker" href="/stock/jnk#NYSE">JNK</a>), which has also seen nearly $2 billion in inflows so far in 2015. The nearly 800 credit securities in JNK are skewed toward slightly lower rated debt, which presses the yield on this ETF in excess of 5.60 percent.

The largest holding in JNK is a Sprint Corp (NYSE: <a class="ticker" href="/stock/s#NYSE">S</a>) bond maturing in 2023. That difference in yield and adjusted duration has produced a slightly enhanced total return this year as well. JNK has gained just under 4 percent so far in 2015.
<h3>Other Peers In The Sector</h3>
Other ETFs that have prospered during this rally are the shorter duration equivalents in the PIMCO 0-5 Year High Yield Corporate Bond ETF (PIMCO ETF Trust) (NYSE: <a class="ticker" href="/stock/hys#NYSE">HYS</a>) and the SPDR Barclays Short Term High Yield Bond ETF (SPDR Series Trust) (NYSE: <a class="ticker" href="/stock/sjnk#NYSE">SJNK</a>).
Both of these ETFs take a slightly different tact from their sector peers by investing in a basket of high-yield bonds with closer maturity dates. This tends to lessen the price fluctuations of the portfolio along with sensitivity to interest rate moves.

	Disclosure: At the time this article was published, clients of FMD Capital Management owned shares of HYS.
&nbsp; 
Image Credit: <a href="http://pixabay.com/en/entrepreneur-start-start-up-career-696969/">Public Domain</a>

Sector ETFs

ALLY

TMUS

High-Yield Bond ETFs Grapple Higher

The high yield bond market has continued to reap the benefits of low interest rates and a hunger for yield that has fixed-income investors climbing down the credit ladder. This healthy demand has helped push prices in many junk bond <a href="http://www.benzinga.com/topic/etfs">ETFs</a> to all-time highs, which in turn has pressed yields near historical lows.

	The iShares iBoxx $ High Yield Corporate Bond ETF (NYSE: <a class="ticker" href="/stock/hyg#NYSE">HYG</a>) is the largest ETF in this space with more than $13.7 billion in total assets. This fund invests in 940 individual bonds of companies with below investment grade credit quality and charges an annual expense ratio of 0.50 percent.

	So far this year, HYG has gained 4.87 percent in total return and is currently sporting a 30-day SEC yield of 4.19 percent. When you consider the 12-month trailing distribution rate on HYG is listed at 5.69 percent, you can see just how far the yield has fallen on this ETF over the last year as the price continues to defy gravity. 
Related Link: <a href="http://www.benzinga.com/etfs/broad-u-s-equity-etfs/14/07/4684615/fed-minutes-set-to-impact-these-etfs">Fed Minutes Set To Impact These ETFs</a>

	Despite this strong historical momentum, recent sluggish price action may point to HYG and similar ETFs such as theSPDR Barclays High Yield Bond ETF (NYSE: <a class="ticker" href="/stock/jnk#NYSE">JNK</a>) hitting a temporary plateau.
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	This may be the result of investors pulling back their appetite for risk and re-allocating to other income opportunities such as <a href="http://www.benzinga.com/topic/reit">REITs</a>, <a href="http://www.benzinga.com/topic/mlp">MLPs</a>, and preferred stocks which have all had much stronger returns in 2014.
Watching the Money
	Another interesting phenomenon is watching asset flows in this space. So far this year, HYG has lost more than $1.6 billion in total assets, while short-duration funds have seen strong inflows. The PIMCO 0-5 Year High Yield Bond ETF (NYSE: <a class="ticker" href="/stock/hys#NYSE">HYS</a>) and SPDR Barclays Short Term High Yield Bond (NYSE: <a class="ticker" href="/stock/sjnk#NYSE">SJNK</a>) have experienced combined growth in assets of $2.8 billion in 2014.

	The lower duration of these ETFs make them less sensitive to changes in interest rates, which may be a rotation strategy to shelter high yield portfolios from the risk of rising rates.

	Many fixed-income experts have been concerned with the level of complacency in high yield bonds over the last several years and worry about the volatility that can expand if credit markets contract. Virtually any sign of stock market weakness or economic instability could impact this high yield sector in a negative manner.

	Despite these risks, high yield bonds continue to produce a level of income that many investors can&rsquo;t replace in this low interest rate environment. For that reason, they may continue to see strong demand for the foreseeable future.

High Yield Bond ETFs Have Hit A Plateau

Exchange traded funds offering exposure to high-yield bonds were decked in May and June on fears of Federal Reserve tapering and the subsequent rise in 10-year Treasury yields. It was a vexing scenario that challenged investors' affinity for a previously beloved income-generating asset class.

	After all, junk bonds usually have lower durations, making them less sensitive to interest rate risk. The trade-off is credit quality risk. Things got so dicey for junk bond ETFs in May and June that some traders even turned to <a href="http://www.benzinga.com/markets/bonds/13/06/3646876/traders-finally-discover-obscure-inverse-junk-bond-etf">obscure inverse funds</a>.

	Investors pulled $2.2 billion from junk bond ETFs in June. Tidbits like that make for alarming though compelling headlines from those have been hazardously been attempting to call a bottom for high-yields bonds for the better of three years now. However, the naysayers have probably forgotten to mention that investors put $2.6 billion back into those ETFs in July, according to BlackRock.

	Related: <a href="http://www.benzinga.com/markets/bonds/13/04/3493707/nifty-junk-bond-etfs-your-broker-forgot-to-mention">Nifty Junk Bond ETFs Your Broker Forgot to Mention</a>

	Due to improved equity and bond markets and robust economic data, "speculative grade issuers benefited from these macroeconomic tailwinds, enjoying a resurgence of issuance, lower yields, and a brightening outlook as downgrades slowed and the ratings outlook showed a less negative bias," said S&amp;P Capital IQ in a new research note.

	Since the start of July, the iShares iBoxx $ High Yield Corporate Bond ETF (NYSE: <a class="ticker" href="/stock/hyg#NYSE">HYG</a>), the largest high-yield bond ETF, has traded modestly higher as has the rival the SPDR Barclays High Yield Bond (NYSE: <a class="ticker" href="/stock/jnk#NYSE">JNK</a>). Those two ETFs have over $24.6 billion in combined assets under management.

	"During July, the average speculative grade yield fell to 6.22%, from 6.59% at the end of June, due to a tightening spread. The speculative grade composite spread contracted to 483 basis points (bps) from 521 bps," said S&amp;P Capital IQ.

	Declining junk bond yields mean prices for the bonds are increasing and investors in ETFs such as HYG and JNK are earning capital appreciation in addition to yield. Additionally, tighter yield spreads with U.S. government bonds imply investors are less concerned about issuer credit quality. Still, lower yields have been used by critics of junk bond ETFs as a point of contention against the asset class, alleging that ETFs such as HYG and JNK may not be offering investors adequate compensation for the credit risk they are supposedly incurring.

	HYG and JNK, both of which S&amp;P Capital IQ rates Marketweight, have 30-day SEC yields of 5.19 and 5.51 percent, respectively. The research firm also has a Marketweight rating on the PIMCO 0-5 Year High Yield Corporate Bond ETF (NYSE: <a class="ticker" href="/stock/hys#NYSE">HYS</a>). HYS has an effective duration of just over two years and a 30-day SEC yield of 3.5 percent. The fund has almost $2.9 billion in AUM.

	Importantly for investors considering stakes in the aforementioned funds is that the high-yield bond outlook improved last month.

	"Meanwhile, the outlook for speculative grade bonds also improved during the month of July. The downgrade to upgrade ratio fell to nearly 1:1.9 in July, from near 2:1 in June. Standard &amp; Poor's Ratings Services downgraded seven U.S. speculative-grade companies and upgraded 13 in July. By comparison, there were 25 downgrades and 13 upgrades in June. By the end of July, the share of companies with positive outlooks and ratings on Standard &amp; Poor's CreditWatch with positive implications inched higher, while the share of those with negative outlook or ratings on CreditWatch with negative implications declined," according to S&amp;P Capital IQ.

	New issuance was also decent last month at $16.7 billion, more than double the $8.2 billion seen in June. However, July's level was below the $23 billion monthly average for U.S. high-yield debt this year, according to S&amp;P Capital IQ.

	HYG has an effective duration of 4.23 years while JNK''s modified adjusted duration is 4.46 years. However, risks do loom with high-yield bond ETFs in the form of a potentially more rigid lending environment that could be brought on by higher interest and Fed tapering.

	For more on ETFs, click <a href="http://www.benzinga.com/etfs">here</a>.

Short Ideas

Junk Bond ETFs Rebound

Here is the ETF Professor's ETF Watch List for Tuesday, May 21, 2013.

Obvious plays of the day: Direxion Daily Gold Miners Bull 3X Shares (NYSE: <a class="ticker" href="/stock/nugt#NYSE">NUGT</a>) and the Guggenheim Solar ETF (NYSE: <a class="ticker" href="/stock/tan#NYSE">TAN</a>).

Give the SPDR EURO STOXX 50 ETF (NYSE: <a class="ticker" href="/stock/fez#NYSE">FEZ</a>) a look.

The First Trust ISE-Revere Natural Gas Index Fund (NYSE: <a class="ticker" href="/stock/fcg#NYSE">FCG</a>) looks to be breaking out.

Emerging markets plays of the day: Market Vectors Egypt ETF (NYSE: <a class="ticker" href="/stock/egpt#NYSE">EGPT</a>), WisdomTree Emerging Markets SmallCap Dividend ETF (NYSE: <a class="ticker" href="/stock/dgs#NYSE">DGS</a>) and the iShares MSCI Brazil Index Fund (NYSE: <a class="ticker" href="/stock/ewz#NYSE">EWZ</a>).

Forex play of the day: CurrencyShares Australian Dollar Trust (NYSE: <a class="ticker" href="/stock/hys#NYSE">HYS</a>).

Bond play of the day: PIMCO Total Return ETF (NYSE: <a class="ticker" href="/stock/bond#NYSE">BOND</a>).

News

Broad U.S. Equity ETFs

New ETFs

Emerging Market ETFs

Currency ETFs

Pre-Market Outlook

BOND

Wisdomtree Emerging Markets Smallcap Dividend Fund

EGPT

First Trust ISE-Revere Natural Gas Index Fund

NUGT

ETFs to Watch May 21, 2013 (BOND, FEZ, NUGT)

Despite falling yields, income-starved investors continue to embrace high-yield bond ETFs. Coming off almost $10 billion in inflows last year, junk bond ETFs raked in $1 billion in new assets in the first four months of 2013, according to a new research note by S&amp;P Capital IQ, fortifying the notion that today's low interest rate environment has bolstered the allure of high-yield bond funds.

	"Investor demand for higher-yielding securities helped push new corporate speculative-grade bond (BB or below) issuance to a record $98 billion during the first four months of 2013, according to Standard &amp; Poor's Global Fixed Income Research 
	(which operates independently from S&amp;P Capital IQ)," said the research firm in the note.

	Although investors have been warm to junk bond ETFs for several years, spreads between high-yield bonds and U.S. Treasury securities have plunged this year.

	"While the spread between investment-grade rated bonds and Treasuries has held firm since the beginning of 2013 at 179 basis points, the speculative-grade spread has declined approximately 20% from 554 basis points at the beginning of 2013," said S&amp;P Capital IQ in the note. "Relative to the last five years,the speculative-grade spread is 39% below the 745 basis points average."

	Even with declining spreads and yields on junk bonds, S&amp;P is bullish on some of the largest high-yield bond ETFs. S&amp;P Capital IQ has Overweight ratings on the iShares iBoxx $ High Yield Corporate Bond Fund (NYSE: <a class="ticker" href="/stock/hyg#NYSE">HYG</a>) and the SPDR Barclays High Yield Bond ETF (NYSE: <a class="ticker" href="/stock/jnk#NYSE">JNK</a>), the two largest junk bond ETFs by assets. S&amp;P also has an Overweight rating on the PIMCO 0-5 Year High Yield Corporate Bond Index ETF (NYSE: <a class="ticker" href="/stock/hys#NYSE">HYS</a>).

	Just a few weeks shy of its second birthday, the PIMCO 0-5 Year High Yield Corporate Bond Index ETF has the shortest duration of the three funds highlighted by S&amp;P, meaning the fund is the least sensitive to potential interest rate increases. Home to over $2.2 billion in assets under management, HYS has a distribution yield of 3.67 years and an effective duration of just 1.84 years, <a href="http://www.pimcoetfs.com/Funds/Pages/HYS.aspx?WT.svl=nav">according to PIMCO data</a>.

	By comparison, the iShares iBoxx $ High Yield Corporate Bond Fund, the largest junk bond ETF by assets with over $15.8 billion, has an effective duration of 3.83 years. The SPDR Barclays High Yield Bond ETF has a modified adjusted duration of 4.11 years. Although it has the longest duration of the three ETFs, JNK has the highest current yield at 6.93 percent.

	Of course, investors need to consider default rates with any fixed income investment, but that is especially true of junk bonds. S&amp;P is forecasting an increase in default rates over the next 10 months.

	"Meanwhile, Standard &amp; Poor's Ratings Services expects that the U.S. corporate trailing 12-month speculative-grade default rate will increase to 3.3% by March 2014, from the 2.5% achieved in the 12 months ended March 2013. The baseline forecast is partially based on assumptions that the U.S. economy will grow by 2.7% in 2013 and the unemployment will decline to less than 7% by the first quarter of 2014. While a higher default rate is a modest concern, it should be noted that the long-term average default rate in the 1981-2012 period was 4.5%," according to the note.

	Year-to-date, HYG is up 4.4 percent while HYS and JNK are both higher by 4.2 percent. HYS has annualized volatility of 9.69 percent since inception while HYG has a three-year standard deviation of just over eight percent, <a href="http://us.ishares.com/product_info/fund/overview/HYG.htm?fundSearch=true&amp;qt=HYG">according to iShares data</a>.

	For more on ETFs, click <a href="http://www.benzinga.com/etfs">here</a>.

Intraday Update

Junk Bond ETFs Still Appealing, Says S&P

On a day when U.S. equities are soaring, bonds may not be the first thing on many investors' minds. Even with that in mind, it is worth noting that some newer bond ETFs have rapidly accumulated assets under management, even as stocks have soared.

	Typically, a "new" ETF is <a href="http://www.benzinga.com/markets/bonds/13/04/3493707/nifty-junk-bond-etfs-your-broker-forgot-to-mention">a year old or less</a>, but in a new research note, S&amp;P Capital IQ looks at a broad swath of successful bond ETFs that have come to market over the past three years.

	"Indeed, 41 of the 181 fixed income ETFs for which we have such data have over $1 billion in assets, helped by the strong demand in 2012 for income-generating ideas," said S&amp;P Capital IQ in the note. "In 2012 alone, fixed income ETFs received approximately $53 billion in new money and these products now have nearly $250 billion in assets."

	The research firm notes that there are seven bond ETFs that debuted over the past three years that currently have at least $1 billion in AUM. S&amp;P sees that resulting from three factors: Who is the asset manager and index provider behind the product? The ETF's costs and does the ETF help to fill a need for investors better than alternatives?

	The PIMCO Total Return ETF (NYSE: <a class="ticker" href="/stock/bond#NYSE">BOND</a>) stands as an obvious example of newer bond ETF that delivers on at least two of those factors for investors. BOND has the advantage of being known as the "Bill Gross ETF" or the ETF equivalent of the massive PIMCO Total Return Fund, the world's largest mutual fund.

	Not even 14 months old, BOND has accumulated more than $5 billion in AUM and its expense ratio of <a href="http://www.pimcoetfs.com/Funds/Pages/BOND.aspx">0.55 percent is fair among actively managed ETFs</a>. Many analysts and members of the press have doted over BOND, anointing it as the savior of the actively managed ETF space. To be sure, BOND has delivered the goods in terms of AUM, returns and low-cost access to Bill Gross.

	However, all the fawning over bond obfuscates the fact that there are <a href="http://www.benzinga.com/markets/bonds/13/04/3493925/three-actively-managed-etfs-to-consider-right-now">some other noteworthy actively managed ETFs on the market today</a>.

	Chief among them is the WisdomTree Emerging Markets Local Debt Fund (NYSE: <a class="ticker" href="/stock/eld#NYSE">ELD</a>), which was also highlighted in the S&amp;P note. Something that folks often forget about the WisdomTree Emerging Markets Local Debt Fund is that this was the first actively managed ETF to surpass $1 billion in AUM. Today, ELD has over $1.9 billion in assets. With an expense ratio of 0.55 percent and an effective duration of 4.83 years, ELD has gained prominence as investors have looked for ways to get exposure to <a href="http://www.benzinga.com/markets/bonds/13/04/3479116/fundamentals-could-lift-this-em-bond-etf">strong government balance sheets in the emerging world</a>.

	ELD's country weights include Brazil, Chile, Colombia, Mexico, Peru, Poland, Turkey, South Africa, Russia, Malaysia, Indonesia, Philippines, Thailand, China and South Korea.

	Flying under the radar is the FlexShares iBoxx 3-Year Target Duration TIPS Index Fund (NYSE: <a class="ticker" href="/stock/tdtt#NYSE">TDTT</a>), which charges just 0.2 percent per year. TDTT debuted in September 2011 and has already hauled in over $1.5 billion in assets. TDTT "gives investors access to the inflation-hedging qualities of TIPS and seeks to provide targeted duration exposure through changing interest rate and economic cycles," <a href="http://www.flexshares.com/exchange-traded-funds/iboxx-3-year-target-duration-us-tips-index">according to FlexShares</a>.

	Another ETF that S&amp;P mentioned that also debuted in 2011 is the iShares Floating Rate Note Fund (NYSE: <a class="ticker" href="/stock/flot#NYSE">FLOT</a>). FLOT also charges 0.2 percent and has also amassed over $1.5 billion in assets.

	Investors looking for shorter duration high-yield corporate bonds <a href="http://www.benzinga.com/markets/bonds/13/04/3501729/three-bond-etfs-with-sub-five-year-durations">have at least two options</a> that S&amp;P mentioned. The PIMCO 0-5 Year High Yield Corporate Bond Index (NYSE: <a class="ticker" href="/stock/hys#NYSE">HYS</a>), which will turn two in June, has a juicy distribution yield of 4.87 percent and an effective duration of 1.85 years. HYS charges 0.55 percent and has more than $1.9 billion in assets.

	HYS has a rival in the form of the SPDR Barclays Short Term High Yield Bond ETF (NYSE: <a class="ticker" href="/stock/sjnk#NYSE">SJNK</a>). Barely more than a year old, SJNK dispels the notion that investors have been pulling money out of high-yield bonds as the ETF has hauled in $1.2 billion in assets. SJNK has a modified adjusted duration of 2.06 years and fees of 0.4 percent.

	S&amp;P also noted the PowerShares Senior Loan Portfolio (NYSE: <a class="ticker" href="/stock/bkln#NYSE">BKLN</a>), which debuted in March 2011 as the first senior loan ETF. BKLN's success has triggered the introduction of at least two copycat ETFs. With a distribution yield of 4.56 percent, BKLN's yield to maturity of 5.58 percent. The ETF is the top asset-gatherer in the PowerShares lineup this year, having pulled in $1.88 billion in new cash, <a href="http://www.invescopowershares.com/flows/">according to issuer data</a>. BKLN now has over $3.4 billion in assets.

	For more on ETFs, click <a href="http://www.benzinga.com/etfs">here</a>.

BKLN

FLOT

TDTT

Some Newer Bond ETFs Flourish

There has been plenty of chatter regarding a great rotation out of bonds into stocks, but ETF inflow data indicate otherwise. In the month of March U.S. stock funds hauled in $11.2 billion in fresh cash, but bond ETFs were sturdy with $4.6 billion in inflows, <a href="http://seekingalpha.com/article/1336301-etfs-rake-in-53-billion-in-q1?source=google_news">according to Morningstar data</a>.

	Morningstar points out the leaders among bond ETFs in terms of first-quarter inflows were the Vanguard Short-Term Bond ETF (NYSE: <a class="ticker" href="/stock/bsv#NYSE">BSV</a>) and the PowerShares Senior Loan Portfolio (NYSE: <a class="ticker" href="/stock/bkln#NYSE">BKLN</a>) at $2.2 billion and $1.5 billion, respectively. Year-to-date, BKLN is the top asset-gather in the entire PowerShares lineup with inflows of $1.73 billion, <a href="http://www.invescopowershares.com/flows/">according to issuer data</a>.

	BKLN and BSV have been steady in terms of pure performance as well, but there are some unheralded options within the high-yield bond ETF universe that investors may want to consider. Consider the following funds.

	AdvisorShares Peritus High Yield ETF (NYSE: <a class="ticker" href="/stock/hyld#NYSE">HYLD</a>) 
	If one follow enough mainstream financial media reporting on high-yield bond ETFs, one is apt to come away with two thoughts. First, <a href="http://www.benzinga.com/markets/bonds/12/12/3144876/following-redemptions-junk-bond-etfs-at-multi-week-highs">the issue of outflows from these funds</a> has been greatly overstated. Second, there are two only high-yield bond ETFs worth looking at: The iShares iBoxx $ High Yield Corporate Bond Fund (NYSE: <a class="ticker" href="/stock/hyg#NYSE">HYG</a>) and the SPDR Barclays Capital High Yield Bond ETF (NYSE: <a class="ticker" href="/stock/jnk#NYSE">JNK</a>).

	Nothing could be further from the truth as HYG and JNK have plenty of credible challengers, including the Peritus High Yield ETF, an actively managed product with over $222.5 million in assets under management.

	Actually, it is HYG and JNK that have a hard time holding a candle to HYLD, at least in terms of performance this year. HYG and JNK, the two largest junk bond ETFs by assets, are up an average of 2.9 percent year-to-date. HYLD is higher by 5.2 percent and has been 150 basis points less volatile than its large rivals. The rub is investors will pay up for active management with a <a href="http://advisorshares.com/fund/hyld">net expense ratio of 1.35 percent</a>.

	PIMCO 0-5 Year High Yield Corporate Bond Index Fund (NYSE: <a class="ticker" href="/stock/hys#NYSE">HYS</a>) 
	Just a couple of months shy of its second birthday, the PIMCO 0-5 Year High Yield Corporate Bond Index Fund does not lead a completely anonymous existence. Nor does it receive the fanfare that HYG and JNK do. Still, there is no denying HYS is massive ETF with nearly 1.9 billion in AUM.

	HYS competes directly with the SPDR Barclays Short Term High Yield Bond ETF (NYSE: <a class="ticker" href="/stock/sjnk#NYSE">SJNK</a>), another prime example of a junk bond ETF <a href="http://www.benzinga.com/markets/bonds/13/01/3229283/junk-bond-etfs-keep-on-trucking">the mainstream press has all but ignored</a>. That is OK because SJNK had almost $519 million in AUM in early December. It now has over $1.1 billion.

	So there is roughly $3 billion in two short duration junk bond ETFs, indicating investors like the idea of high yields with diminished interest rate risk. HYS delivers with an estimated yield to maturity of 4.51 percent, a distribution yield of 4.87 percent and an effective duration of 1.87 years, <a href="http://www.pimcoetfs.com/Funds/Pages/HYS.aspx?WT.svl=nav">according to PIMCO data</a>. That duration is slightly lower than the modified adjusted duration of 2.06 years on SJNK.

	iShares Emerging Markets High Yield Bond Fund (NYSE: <a class="ticker" href="/stock/emhy#NYSE">EMHY</a>) 
	The iShares Emerging Markets High Yield Bond Fund, which has amassed nearly $258 million in AUM in just over a year of trading, is one ETF international bond investors might want to keep an eye on in the coming days. Actually, keep an eye on EMHY on Friday and Monday because the ETF <a href="http://www.benzinga.com/markets/bonds/13/03/3382166/bond-etfs-resisting-chavez-rumors-yet-again">has one of the largest exposures to Venezuela</a>.

	Venezuela holds a general election Sunday, the first since the death of former President Hugo Chavez. Chavez's heir, Nicolas Maduro is expected to win and that is an outcome the bond market may not like. And one that could make EMHY somewhat vulnerable with an almost 17 percent weight to Venezuela. Turkey is EMHY's largest country weight and the Philippines is third after Venezuela.

	EMHY has a distribution yield of 5.43 percent and an effective duration of 5.97 years, <a href="http://us.ishares.com/product_info/fund/overview/EMHY.htm">according to iShares data</a>.

	For more on ETFs, click <a href="http://www.benzinga.com/etfs">here</a>.