economy
Investors poured $15 billion into more risky corners of the bond market in April. Where they're finding yield
Fixed income ETFs with a little more risk were especially attractive for investors last month as the funds continued to offer attractive yields.
TL;DR
- Investors allocated $15 billion to credit-sensitive bond ETFs in April.
- Inflows included $7 billion into investment-grade corporate bonds and $3.8 billion into high-yield bond ETFs.
- Funds focused on bank loans and CLOs attracted $2.5 billion.
- Renewed risk appetite was attributed to decreased fears of an Iran war escalation and positive company earnings across various sectors.
- The S&P 500 recorded a 10.4% gain in April.
- High-yield bond ETFs like USHY and SPHY offer 30-day SEC yields approaching 7%.
- Bank loan and CLO ETFs provide attractive yields, with JAAA at 4.74% and BKLN at 6.28%.
- Experts emphasize the importance of diversification in bond investing and caution against over-allocating to bank loans and high-yield bonds.
- The yield spread between high-yield bonds and Treasurys is narrow, potentially eroding outperformance if bond prices fall.