Opinions
Stan Wong
iShares US High Yield Bond Index ETF
XHY-T
COMMENT
Jan 13, 2017
$20.050
Stock price when the opinion was issued
E.T.F.'s
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COMMENT
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.
E.T.F.'s
DON'T BUY
For US high-yield bonds, he hedges the currency. No sense buying a US high-yield bond fund, if the CAD rises from the 75 cent level. There is a US high-yield bond ETF that hedges the currency so you don't get burned if the US dollar softens up. He doesn't think XHY hedges, but check. Do not buy US bonds unless you're going to have a currency hedge.
E.T.F.'s
DON'T BUY
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.
E.T.F.'s
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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.