Shares of the SPDR Barclays Capital High Yield Bond ETF (NYSE:
), the second-largest high-yield bond ETF by assets, are higher
by half a percent today despite rising short interest in the
fund. The volume of borrowed shares in JNK jumped to 22.8 million
on Friday, about three times the average during the past year and
up from 9.75 million shares a month ago,
Bloomberg reported, citing Markit Group data
Consider that factoid about JNK, which has $11.6 billion in
assets under management, the latest ding on U.S.-focused junk
. Until recently, the asset class has thrived as investors have
sought new avenues for yield in today's low interest rate
Last week, it was reported that JNK's primary rival, the
larger iShares iBoxx $ High Yield Corporate Bond Fund (NYSE:
), saw outflows of almost $219 million on Tuesday. The five
largest junk bond ETFs have seen outflows totaling $1.97 billion
Skewering HYG, JNK and rival U.S.-focused high-yield bond ETFs
for asset losses obfuscates a critical fact. That being
international junk bond ETFs have been quite proficient in
gathering assets this year. That fact is made all the more
impressive when considering that all of the major ETFs
exclusively devoted to global high-yield debt did not even exist
until this year.
Take the example of the Market Vectors Emerging Markets High
Yield Bond ETF (NYSE:
). HYEM, which debuted in early May, focuses on a burgeoning
segment of the bond market. Dollar-denominated emerging markets
bonds represented $84 billion of the EM bond universe in 2003,
but that number jumped to $541 billion last year according to
data from Bank of America Merrill Lynch and J.P. Morgan.
To this point, HYEM has gathered $20.7 million in assets under
management. Not jaw-dropping, but a decent start for a new ETF
with a niche focus. A 30-day SEC yield of 6.72 percent and the
growth of the high-yield market in developing nations could be
catalysts for future inflows to HYEM.
While $20.7 million may not sound impressive, the $180.3
million raked in by the Market Vectors International High Yield
Bond ETF (NYSE:
) is. That fund debuted in early April and is a developed market
equivalent to HYEM. France, the U.K., Germany and Canada combine
for about 35 percent of IHY's weight.
No matter how one slices things, $180.3 million in inflows is
stellar for an ETF that is not even 10 months old. However, the
success of IHY is rarely, if ever mentioned, in the mainstream
) iShares unit, the world's largest ETF sponsor, has found its
own success with global high-yield bond funds this year. The
iShares Global High Yield Corporate Bond Fund (BATS: GHYG), which
debuted in early April, has nearly $35.5 million in AUM. That is
with U.S. issues accounting for nearly two-thirds of the fund's
weight and with the ETF trading on the BATS Exchange, which is
not nearly as well known as the New York Stock Exchange or
The iShares Global ex USD High Yield Corporate Bond Fund
(BATS: HYXU) is the iShares rival to IHY. To be sure, HYXU has
not proven as popular to this point with $25.4 million in AUM.
That might have something to do with the euro being the dominant
currency in this ETF. Euro-denominated issues account for over 86
percent of HYXU's weight.
So GHYG and HYXU have almost $61 million in AUM combined and
that may not be enough to catch critics' eyes. Perhaps the $176
million held by the iShares Emerging Markets High Yield Bond Fund
(BATS: EMHY) is enough.
EMHY debuted in April and its success indicates investors are
willing to take on some of level of risk with their international
bond holdings. Sure, Turkey and the Philippines combine for over
26 percent of the fund's weight, but Venezuela is the
second-largest country weight with an allocation north of 14
percent. This is an ETF where Ukraine, Hungary and Lebanon are
more prominently displayed than Brazil, China and Russia.
Add up the flows to IHY and EMHY, the latter of which also
trades on BATS, and the number is over $356 million. Over $180
million and $176 million, respectively, for two ETFs that debuted
in April is an accomplishment in any environment, let alone that
has been more risk off than risk on. Using these two funds as the
measuring sticks, perhaps it is fair to argue that some of the
money departing HYG and JNK is flowing to global junk bond
Even if that is not the case, it is clear investors have some
appetite for international high-yield bonds. It would seem only
fair to mention that when highlighting outflows from HYG, JNK and
other U.S.-focused junk bond ETFs, right?
For more on junk bond ETFs, click
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