iShares’ High Yield Corporate Bond ETF sees record $1.5bn inflow over six days

Mar 4th, 2016 | By | Category: Fixed Income

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Negative sentiment surrounding the US high yield corporate bond market since the start of the year appears to have reversed as inflows into the iShares iBoxx High Yield Corporate Bond ETF (NYSE Arca: HYG), the largest exchange-traded fund tracking this segment, surpassed $1.5bn over six days in mid-February, according to data compiled by Bloomberg.

iShares’ High Yield Corporate Bond ETF sees record $1.5bn inflow over six days

The record inflows of $1.5bn over six days in February signal a turnaround from the market rout in January, which saw net outflows of a similar amount occur.

The significant inflows marked the fastest gathering of assets experienced by the fund since its inception in April 2007, including a single-day record of $481m on 11 February 2016.

The spike in buying activity lies in contrast to trading earlier in the year, which saw a similar amount withdrawn from the ETF as investors sought ‘risk off’ assets following heightened market volatility in January resulting in a 10% fall in the S&P 500 Index.

The stock market rout that occurred at the start of the year is believed to have been driven by fears over the global impact of slowing growth in China, coupled with persistently volatile energy markets. The subsequent reversal may have been due to a brief rally in oil prices and a growing consensus that risk on assets may have been oversold during this period.

The iShares High Yield Corporate Bond ETF tracks the performance of the Markit iBoxx USD Liquid High Yield Index.

The fund provides exposure to US corporate bonds that have designated ‘junk’ status – an average credit quality rating of BBB or lower from the three major ratings agencies, Standard & Poors, Moodys, and Fitch.

The iShares iBoxx High Yield Corporate Bond ETF currently has over $16.1bn in assets under management (AUM). The fund has 991 constituents of which the main holdings are in the communications (26.1%), consumer non-cyclical (14.8%), consumer cyclical (11.8%), energy (9.5%), and capital goods (7.7%) sectors. The credit quality of constituents is dispersed between ratings of BB (50.0%), B (38.5%) and CCC (10.1%). All figures as of 3 March 2016. The fund has a total expense ratio of 0.50%.

The second largest ETF covering the US high yield corporate bond segment is the SPDR Barclays High Yield Bond ETF (NYSE Arca: JNK) which has total AUM over $10.8bn.  The allocation of the fund is primarily toward the industrial (87.4%) and finance (9.0%) sectors. The credit quality of constituents is dispersed between ratings of BB (43.1%), B (41.4%) and CCC or lower (15.6%). All figures as of 3 March 2016. The fund has a total expense ratio of 0.40%.

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