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High-Yield Bond ETFs: Investing for Higher Income and Diversification

Your comprehensive guide to investing in High-Yield Bonds through income-focused ETFs

Guide to Investing in High-Yield Bond ETFs

High Yield Bonds Guide Image High-yield bonds, often referred to as 'junk bonds,' offer higher interest rates compared to investment-grade bonds, compensating investors for their increased credit risk. These bonds are issued by companies with lower credit ratings, making them more volatile but potentially more rewarding. High-Yield Bond ETFs provide a diversified and liquid way to invest in this asset class, spreading risk across multiple issuers and sectors. These ETFs bundle a variety of high-yield bonds, offering exposure to corporate debt markets while mitigating the risks associated with individual bond defaults. Investors seeking higher income and portfolio diversification often turn to High-Yield Bond ETFs as a strategic component of their fixed-income allocation.

Key Benefits:

Higher Income Potential

High-Yield Bond ETFs typically offer higher yields compared to investment-grade bonds or Treasury securities, providing enhanced income for investors.

Diversification

These ETFs spread risk across multiple issuers and sectors, reducing the impact of any single bond default on the overall portfolio.

Liquidity

ETFs provide easy access to the high-yield bond market, allowing investors to buy and sell shares throughout the trading day.

Convenience

Investing in High-Yield Bond ETFs eliminates the need to research and purchase individual bonds, simplifying portfolio management.

ETFs in Industry:

ETF NameTickerExpense RatioAUMAsset Class52w Low/High30 Days1 MonthYTD3 YearALL Years
iShares Broad USD High Yield Corporate Bond ETFUSHY0.08 %$20BBond 11.21 %7.22 %9.75 %4.72 %
iShares iBoxx $ High Yield Corporate Bond ETFHYG0.49 %$15.1BBond 11.20 %7.04 %9.04 %4.96 %
SPDR Portfolio High Yield Bond ETFSPHY0.05 %$8.7BBond 13.75 %6.95 %9.70 %4.92 %
SPDR Bloomberg High Yield Bond ETFJNK0.40 %$7.6BBond 18.94 %6.98 %9.26 %5.01 %
iShares 0-5 Year High Yield Corporate Bond ETFSHYG0.30 %$6.5BBond 16.57 %6.33 %8.50 %4.35 %
SPDR Bloomberg Short Term High Yield Bond ETFSJNK0.40 %$4.9BBond 8.77 %6.12 %8.91 %4.63 %
Xtrackers USD High Yield Corporate Bond ETFHYLB0.05 %$3.9BBond 20.66 %7.11 %9.25 %4.68 %
First Trust Tactical High Yield ETFHYLS1.05 %$1.6BBond 8.23 %6.51 %8.62 %4.48 %
PIMCO 0-5 Year High Yield Corporate Bond Index Exchange-Traded FundHYS0.57 %$1.5BBond 43.33 %7.14 %9.20 %5.06 %
FlexShares High Yield Value-Scored Bond Index FundHYGV0.37 %$1.4BBond 13.19 %6.24 %9.00 %4.97 %
Invesco BulletShares 2026 High Yield Corp Bond ETFBSJQ0.42 %$1BBond 35.08 %5.65 %7.59 %4.81 %
Schwab High Yield Bond ETFSCYB0.03 %$1BBond 9.75 %6.86 %7.20 %7.61 %
Invesco BulletShares 2025 High Yield Corporate Bond ETFBSJP0.43 %$993.5MBond 39.55 %4.29 %7.42 %4.77 %
AB Short Duration High Yield ETFSYFI0.40 %$803.8MBond 1.07 %5.79 %3.55 %6.75 %
iShares iBonds 2026 Term High Yield and Income ETFIBHF0.35 %$799.3MBond 20.75 %5.93 %8.47 %4.76 %
Franklin High Yield Corporate ETFFLHY0.40 %$614.6MBond 46.88 %7.36 %9.92 %6.70 %
iShares iBonds 2025 Term High Yield & Income ETFIBHE0.35 %$593MBond 35.97 %4.32 %7.41 %4.76 %
Pacer Pacific Asset Floating Rate High Income ETFFLRT0.60 %$513.9MBond 53.65 %5.21 %10.25 %4.46 %
iShares J.P. Morgan EM High Yield Bond ETFEMHY0.50 %$452.2MBond 2.43 %12.17 %13.63 %4.85 %
Invesco BulletShares 2027 High Yield Corporate Bond ETFBSJR0.42 %$443.2MBond -3.37 %6.21 %8.51 %4.71 %
iShares Interest Rate Hedged High Yield Bond ETFHYGH0.52 %$435MBond 74.73 %5.29 %9.77 %4.54 %
VanEck Emerging Markets High Yield Bond ETFHYEM0.40 %$408.3MBond 1.40 %8.35 %12.15 %4.58 %
Invesco BulletShares 2028 High Yield Corporate Bond ETFBSJS0.42 %$382.4MBond 15.04 %6.93 %8.92 %3.55 %
Fidelity Enhanced High Yield ETFFDHY0.35 %$373.1MBond 39.43 %7.35 %9.08 %5.67 %
BNY Mellon High Yield ETFBKHY0.22 %$354.3MBond 3.54 %7.03 %9.47 %8.26 %
Invesco Fundamental High Yield® Corporate Bond ETFPHB0.50 %$328.4MBond 47.02 %7.43 %8.40 %3.67 %
Principal Active High Yield ETFYLD0.39 %$301.4MMulti-Asset -32.65 %5.09 %9.37 %5.26 %
BondBloxx BB-Rated USD High Yield Corporate Bond ETFXBB0.20 %$280.8MBond 56.43 %7.22 %7.96 %-2.15 %
iShares iBonds 2027 Term High Yield and Income ETFIBHG0.35 %$275MBond -6.51 %5.81 %8.17 %4.65 %
PGIM Active High Yield Bond ETFPHYL0.39 %$270MBond 12.62 %7.93 %9.71 %5.44 %
Invesco BulletShares 2029 High Yield Corporate Bond ETFBSJT0.42 %$229.3MBond 27.24 %5.92 %9.25 %4.56 %
iShares High Yield Corporate Bond BuyWrite Strategy ETFHYGW0.69 %$223.5MBond 50.33 %4.72 %6.61 %9.56 %
iShares iBonds 2028 Term High Yield and Income ETFIBHH0.35 %$222.2MBond 12.60 %6.36 %8.99 %4.81 %
Xtrackers Low Beta High Yield Bond ETFHYDW0.20 %$187.6MBond 56.71 %7.13 %7.42 %10.90 %
iShares ESG Advanced High Yield Corporate Bond ETFHYXF0.35 %$184.7MBond 5.34 %7.26 %9.43 %5.14 %
Harbor Scientific Alpha High-Yield ETFSIHY0.48 %$182.3MBond 35.59 %6.34 %9.78 %9.62 %
AB High Yield ETFHYFI0.40 %$181.4MBond 22.10 %7.24 %7.96 %10.22 %
WisdomTree Interest Rate Hedged High Yield Bond FundHYZD0.43 %$180MBond 89.21 %6.18 %8.99 %4.28 %
ProShares High Yield-Interest Rate Hedged ETFHYHG0.50 %$175.9MBond 48.05 %3.36 %9.32 %11.83 %
iShares US & Intl High Yield Corp Bond ETFGHYG0.40 %$168.7MBond 42.57 %9.12 %9.97 %4.57 %
iShares iBonds 2029 Term High Yield and Income ETFIBHI0.35 %$157.5MBond 25.14 %6.21 %9.57 %4.80 %
Xtrackers Short Duration High Yield Bond ETFSHYL0.20 %$156MBond 20.43 %6.27 %8.63 %9.87 %
Invesco Global ex-US High Yield Corporate Bond ETFPGHY0.35 %$155.1MBond 88.85 %7.57 %9.09 %4.07 %
Simplify High Yield ETFCDX0.25 %$153.3MBond -0.29 %9.90 %10.74 %5.61 %
BondBloxx CCC-Rated USD High Yield Corporate Bond ETFXCCC0.40 %$145.9MBond -20.57 %5.73 %12.08 %-2.35 %
Goldman Sachs Access High Yield Corporate Bond ETFGHYB0.15 %$144.7MBond 28.30 %7.89 %9.21 %11.85 %
Counterpoint High Yield Trend ETFHYTR0.79 %$116.2MBond 21.47 %4.56 %6.39 %8.62 %
Invesco BulletShares 2030 High Yield Corporate Bond ETFBSJU0.42 %$109.4MBond 37.03 %6.62 %9.24 %5.10 %
Nuveen ESG High Yield Corporate Bond ETFNUHY0.31 %$99.3MBond 0.00 %5.81 %8.10 %7.89 %
BondBloxx USD High Yield Bond Industrial Sector ETFXHYI0.35 %$82.6MBond 43.54 %6.23 %8.48 %7.31 %
ProShares Short High YieldSJB0.95 %$78.9MBond 45.28 %-1.22 %-2.65 %-5.31 %
BondBloxx USD High Yield Bond Consumer Cyclicals Sector ETFXHYC0.35 %$70.3MBond 64.53 %5.57 %9.13 %7.25 %
BondBloxx USD High Yield Bond Financial & REIT Sector ETFXHYF0.35 %$59.8MBond 84.53 %7.47 %9.54 %7.29 %
Invesco High Yield Bond Factor ETFIHYF0.39 %$58.3MBond -23.64 %6.26 %9.58 %4.14 %
Fidelity Sustainable High Yield ETFFSYD0.56 %$46.8MBond -11.46 %7.10 %9.73 %5.48 %
BondBloxx USD High Yield Bond Healthcare Sector ETFXHYH0.35 %$46.7MBond 78.47 %8.93 %10.77 %7.12 %
Xtrackers Risk Managed USD High Yield Strategy ETFHYRM0.30 %$45.8MBond 9.85 %4.39 %8.19 %4.28 %
iShares International High Yield Bond ETFHYXU0.40 %$44.2MBond -16.44 %16.27 %11.79 %3.50 %
BondBloxx USD High Yield Bond Consumer Non-Cyclicals Sector ETFXHYD0.35 %$33.9MBond 48.13 %7.00 %8.16 %7.32 %
Virtus Newfleet Short Duration High Yield Bond ETFVSHY0.39 %$30.9MBond -6.17 %5.61 %9.21 %4.07 %
Federated Hermes Short Duration High Yield ETFFHYS0.51 %$30.6MBond 55.43 %6.19 %8.22 %7.81 %
BondBloxx B-Rated USD High Yield Corporate Bond ETFXB0.30 %$29.3MBond 11.94 %6.09 %8.30 %-2.27 %
BondBloxx USD High Yield Bond Sector Rotation ETFHYSA0.55 %$29.2MBond 55.67 %6.79 %7.99 %7.57 %
KraneShares Asia Pacific High Income USD Bond ETFKHYB0.69 %$25.3MBond 54.40 %8.58 %11.33 %11.72 %
VanEck International High Yield Bond ETFIHY0.40 %$25.2MBond 60.61 %11.68 %10.49 %4.07 %
BondBloxx USD High Yield Bond Energy Sector ETFXHYE0.35 %$15.5MBond 14.45 %5.53 %7.70 %7.34 %
Xtrackers High Beta High Yield Bond ETFHYUP0.20 %$10.4MBond 10.54 %6.83 %10.35 %10.56 %
ProShares Ultra High YieldUJB—$10.2MBond 3.88 %9.35 %11.80 %-3.44 %
Invesco High Yield Select ETFHIYS0.48 %$8.3MBond 56.43 %6.65 %—7.83 %
iShares Inflation Hedged High Yield Bond ETFHYGI0.52 %$5.4MBond 0.00 %6.58 %9.45 %9.33 %
BondBloxx USD High Yield Bond Telecom, Media & Technology Sector ETFXHYT——Bond 12.45 %7.22 %7.78 %7.04 %

Why Invest?

High-Yield Bond ETFs can be an attractive option for investors seeking higher income and diversification. These ETFs offer exposure to a broad range of corporate bonds with higher yields than government or investment-grade bonds. While they come with increased credit risk, the diversification provided by ETFs helps mitigate the impact of any single issuer's default. High-Yield Bond ETFs can enhance portfolio returns, especially in environments where interest rates are low or declining, making them a valuable tool for income-focused investors.

Expert Insights:

When evaluating High-Yield Bond ETFs, consider factors such as credit quality, duration, and sector exposure. Funds with a mix of BB and B-rated bonds may offer a balance between yield and risk. Pay attention to the ETF's expense ratio and liquidity, as these can impact overall returns. Given the cyclical nature of high-yield bonds, it's also important to monitor economic conditions, as recessions can lead to higher default rates. Position sizing should reflect the higher volatility and credit risk inherent in this asset class.

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Investment Considerations

While high-yield bonds offer attractive income potential, investors should consider these key factors:

Credit Risk

High-yield bonds carry a higher risk of default compared to investment-grade bonds, which can impact returns.

Interest Rate Sensitivity

While less sensitive than Treasuries, high-yield bonds can still be affected by rising interest rates.

Economic Cycles

The performance of high-yield bonds is closely tied to economic conditions, with recessions leading to higher default rates.

Portfolio Allocation

Given their higher risk, high-yield bonds should be balanced with other fixed-income and equity investments in a diversified portfolio.

Sector Outlook

Market Trends and Growth Drivers

The high-yield bond market is influenced by economic conditions, interest rates, and corporate credit health. Several key trends are shaping the sector's future.

Interest Rate Environment

High-yield bonds are sensitive to changes in interest rates, with lower rates generally supporting bond prices and higher yields.

Economic Growth

Strong economic growth can reduce default risks, while recessions may increase defaults and volatility in the high-yield market.

Credit Spreads

The difference in yield between high-yield bonds and Treasuries reflects market sentiment and risk appetite, impacting ETF performance.

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