High-Yield Bond ETFs: Interest Rate Risk Vs. Credit Risk

Senior floating-rate bank loans have helped investors generate income under the threat of rising rates, but with the Fed holding off on tapering, high-yield, junk bond exchange traded funds could be a better play. "Our latest High Yield and Bank Loan Outlook report reveals that high yield bond fund flows have been volatile, and performance has been uneven," Scott Minerd, Global Chief Investment Officer at Guggenheim Partners, said in a note. "Now that the risk of a near-term increase in interest rates has faded, we expect to see more stability in high-yield flows and more volatility in bank loans as mutual fund investors reposition to search for yield rather than protecting themselves from rising rates." The PowerShares Senior Loan Portfolio (BKLN) has attracted $4.4 billion in inflows so far this year, making it the most prolific PowerShares ETF by that metric. Senior bank loan funds are... Read more