Jumping for Emerging Markets Junk Bonds

The first quarter was kind to exchange traded funds holding U.S. high-yield corporate debt as default rates remain benign.  The iShares iBoxx $ High Yield Corporate Bond ETF and the SPDR Barclays High Yield Bond ETF , the two largest U.S. high-yield bond ETFs, have remained sturdy despite rising anticipation the Federal Reserve will raise interest rates sooner than expected, speculation that has prompted elevated short interest in the two funds.  High-yield corporate debt from emerging markets issuers is catching investors’ attention as well, even with the spotlight on corporate defaults in China. Even with a 12.5% weight to China, by far its largest country allocation, the Market Vectors Emerging Markets High Yield Bond ETF gained nearly 4% in the first quarter, outpacing comparable U.S.-focused ETFs along the way.

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-Igor P Purlantov