Hank CunninghamiShares US High Yield Bond Index ETFXHY.TOPAST TOP PICKNov 28, 2011

If you expect rate cuts and softer growth, you may want ZLC or XLB. If you're a bit higher income and willing to accept business cycle risk, then you can go into high yield bond ETFs -- XHY or ZHY.

Holds 1,157 issues, all high-yielding. Duration is only 3.4 years, so it's a safe way to play the high yield market. Caveat: the high-yield market and its yields have narrowed so sharply, so this will not be a great performer, but above average in coming years.

In general, the high-yield bond market is yielding at least 300-400 bps above investment-grade bonds. This one should have that yield advantage, and if it doesn't, there's an issue. Yield is 5.8%, and the high-yield bond market is yielding over 8%. He's going to take a look at this ETF after the show.

Holds investment-grade bonds? Doesn't like it, because "high-yield" means "junk." Never trust yield on a bond or mutual fund. Go beyond the current yield. XBB is fine or ZST.

He would look rather at emerging market bonds for income. The credit quality is higher as the US economy is late stage with higher probability of defaults.

Which fund would you recommend for high-yield bonds? You are always dealing with US bonds in this one. He would probably look at the ZHY as well as the XHY. Remember, you are not getting the same premium for high-yield that you used to. He would rather buy a Covered Call. He isn’t a big fan of high-yield stuff.

(Top Pick Mar 14’16, Up 15%) You have to take credit rate rise in the fixed income market. This one is hedged. He switched recently into HYI-T for an active manager.

ETF’s for bonds are not like stocks. They don’t have great tracking. If you are going to buy a high yield bond ETF, only buy a Cdn$ hedged ETF. If the Cdn$ starts to rally, you are going to lose your whole return, and possibly more.

A Canadian hedged version of the iShares High Yield Bond ETF. (The US$ version is HYG-N for those people who want to own this in US$, and who are more bullish on the US$.) If you have regular government bonds in your portfolio, this gives you high-yield bonds for picking up more income. It has done well in the last 12 months being up by about 13%. Thinks we are probably in the 6^th inning of the high-yield bond market.

Doesn’t think you need the Canadian hedge. You want to be exposed to US dollars. He would rather own iShares High Yield Corporate Bond (HYG-N). Also, if you have a credit crunch or an economic malaise of some sort, high-yield bonds tend to fall quicker than traditional government and investment grade corporate bonds. However, the economy looks to be recovering at this point and high-yield bonds are probably the place to be.

Likes the spread on this. It has been hit a bit. He doesn’t mind that it is hedged, as you already have the risk of the underlying asset plus the currency risk. It is very attractive. He prefers corporate credits and risk credit to governments.