Opinions
Stan Wong
iShares US High Yield Bond Index ETF
XHY-T
BUY
Mar 09, 2017
$19.820
Stock price when the opinion was issued
E.T.F.'s
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COMMENT
Which fund would you recommend for high-yield bonds? You are always dealing with US bonds in this one. He would probably look at the ZHY as well as the XHY. Remember, you are not getting the same premium for high-yield that you used to. He would rather buy a Covered Call. He isn’t a big fan of high-yield stuff.
E.T.F.'s
DON'T BUY
For US high-yield bonds, he hedges the currency. No sense buying a US high-yield bond fund, if the CAD rises from the 75 cent level. There is a US high-yield bond ETF that hedges the currency so you don't get burned if the US dollar softens up. He doesn't think XHY hedges, but check. Do not buy US bonds unless you're going to have a currency hedge.
E.T.F.'s
DON'T BUY
In general, the high-yield bond market is yielding at least 300-400 bps above investment-grade bonds. This one should have that yield advantage, and if it doesn't, there's an issue. Yield is 5.8%, and the high-yield bond market is yielding over 8%. He's going to take a look at this ETF after the show.
E.T.F.'s
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A Canadian hedged version of the iShares High Yield Bond ETF. (The US$ 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 6th inning of the high-yield bond market.