Opinions
Tyler Mordy
iShares US High Yield Bond Index ETF
XHY-T
DON'T BUY
Sep 06, 2018
$19.230
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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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.