Schwab to launch low-cost high yield bond ETF

Jun 27th, 2023 | By | Category: Fixed Income

Schwab Asset Management is preparing to introduce a new fixed income ETF in the US offering investors cheaply priced exposure to a core portfolio of high yield corporate bonds.

Schwab to launch low-cost high yield bond ETF

Schwab Asset Management is set to introduce one of the cheapest high yield bond ETFs on the market.

The Schwab High Yield Bond ETF (SCYB US) is expected to list on NYSE Arca on 11 July with an expense ratio of just 0.10%.

The low price tag means the ETF will place amongst the cheapest for its Morningstar category, setting the fund up as a notable competitor against well-established ETFs in the space including the $15.3 billion iShares iBoxx $ High Yield Corp Bond ETF (HYG US), which has an expense ratio of 0.48%; and the $8.4bn SPDR Bloomberg High Yield Bond ETF (JNK US), which is priced at 0.40%.

Nicohl Bogan, Director of Product Strategy and Development, Schwab Asset Management, said: “The Schwab High Yield Bond ETF is a timely addition to our line-up of fixed income ETFs as investors
continue to seek out low-cost, straightforward products that help diversify their portfolios.

“SCYB is a compelling offering for investors seeking potentially higher-yielding fixed income with the inherent benefits of an ETF, including tax efficiency and ease of trading.”

The fund will be linked to the ICE BofA US Cash Pay High Yield Constrained Index which delivers broad-based exposure to US dollar-denominated high yield corporate bonds. The index focuses on
liquidity while attempting to mitigate investment risk through security selection and issuer diversification.

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