Pimco, the world's biggest bond fund manager, today rolled out a
high-yield corporate bond index ETF focused on the short end of the
yield curve, offering investors an alternative to popular
longer-dated exchange-traded junk bond options that are likely to
be more vulnerable to increases in interest rates.
The Pimco 0-5 Year High Yield Corporate Bond Index Fund
(NYSEArca:HYS), which is based on the BofA Merrill Lynch 0-5 Year
US High Yield Constrained Index, comes with an expense ratio of
0.55 percent after a fee waiver, the Newport Beach, Calif.-based
company said on its website.
Noninvestment-grade debt looms as a promising way to obtain
extra yield at a time when benchmark short-term interest rates
remain near zero after the breakdown of global credit markets
provoked a market crash and perhaps the worst downturn since the
1930s. Moreover, short-dated debt prices hold up better than
longer-dated bonds when rates rise, adding to their
The most popular high-yield U.S.-listed ETFs are the iShares
iBoxx $ High Yield Corporate Bond Fund (NYSEArca:HYG) and the SPDR
Barclays Capital High Yield Bond ETF (NYSEArca:JNK).
HYG's portfolio has an average maturity of just over five years,
while JNK's is about seven years, the companies said on their
respective websites. HYG has more than $8.5 billion in assets,
while JNK has gathered about $7 billion, according to data compiled
The noninvestment-grade debt in the new Pimco fund must be
dollar denominated and issued in the U.S. It must have fewer than
five years' remaining term to final maturity, a fixed coupon
schedule and a minimum amount outstanding of $100 million, issued
publicly, the company said. Also, allocations to an individual
issuer will not exceed 2 percent.
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