iShares US High Yield Bond Index ETF (XHY.TO)

One of the few hedged things he has at the moment. He likes the US high-yield bond market. The spread has got huge on this. The yield on this is roughly around 7%. With a yield to maturity and a duration of about 4 years, this is pretty good. The hedge works, because you don’t have to take your currency risk. Also, you don’t get a withholding tax.

(A Top Pick Feb 11/15. Down 10.5%.) This has been one of the worst years ever for the high-yield market. He has been in and out of this twice since his recommendation. This is nothing, but US high-yield bonds, and hedged back to the Cdn$. Well diversified both by maturity and credit. The yield to maturity is slightly under 9%.

Has always been a “canary in the coal mine” for him. There has been a deterioration in the credit qualities because there is quite a bit of energy included. There is also the issue of the interest rate scenario. Treasuries and high-yields seem to be poised to do little bit better now, so now is not a bad time to just sit tight. There might be a little bit of a rebound. 6% dividend yield and it is hedged to the Cdn$.

He steers clients toward ETFs instead of high yield bonds. He likes XHY-T which he has recommended frequently. He likes this because it has 450 issues and believes that if one of them goes down it won't hurt your performance. He believes in preservation of capital and not reaching for yield. Recommends sticking to consumer products and the non-cyclical companies. Stay save. This has all US high yielding securities.

Continues to like the high-yield market. High-yield bonds continue to make sense. You are getting a 4.5%-5.5% yield. We are still seeing an expanding economy in the US. He doesn’t see any issues with owning high-yield bonds at this point.

This is just high yield bonds. The problem is that high yield correlates with equity markets. It does not give the normal negative correlation of bond yields to equities. XTR-T is more diversified.

The collapse of energy prices put a shudder of fear through the high-yield bond market, to the extent that a massive redemption occurred and high-yield bond markets climbed. Has a yield of about 6.2% with 500-600 different issues in it. This is hedged, so there is no currency risk in it.

High yield bonds would clearly have been a stronger performer given the currency move in US dollars. They have fallen off a little, and money has gone into the safer space of treasuries, etc. When there are fears about the economy and corporations, then there are worries about credit qualities, which is why high yield Bonds have fallen off. Thinks credit spreads have widened to the point that they look attractive once again. However, keep an eye on your holdings. If the economy doesn’t come along as well as we expect, then you don’t want to be in this area.

Thinks the boom is over in the high-yield market, and the price of this particular ETF will likely work itself lower. Very liquid and very diversified, but a major percentage of the bond held in this ETF is in the energy patch and there is a lot of concern about some of the credit worthiness of some of the issues as long as the price of oil stays where it is or goes even lower. Thinks you will get a chance to buy it cheaper.

High yield ETF. Have less exposure to interest rates and more exposure to credit. As interest rates rise it will take fewer losses than others. But the next crisis in the equity market will be precipitated by an increase in interest rates. He’d be cautious. High interest rate bond rates command a little more of a fee than others. (0.62%)

High yield bonds are short duration and so not as affected by increasing interest rates. Should be the best performing asset class for the next 12 months.

High yield bond ETF, hedged. He wants more direct US dollar exposure. Broad exposure to the high yield market. No active management. He prefers active management as companies fall into junk status and distort the index.

He is still bearish on the bond market. The yield on high-yield bonds is becoming more attractive. His overview on corporate bonds is to never have more than 10% of your fixed income portfolio in any one credit or sector. For high yield funds he would have more than 5%.

(A Top Pick Aug 2/12. Up 10.81%.) Sold his holdings.

A high yield bond ETF and the obvious risk is if interest rates rise quicker than anticipated. Difficulty with investing in some of these ETFs is that their average bond maturity could be 6-7 years out and so the risk of all high-yield ETFs is that interest rates rise and capital starts to erode. He would recommend that you miss this ride. You have already missed a large part of the move.