24/7 Wall St. » JNK

Junk Bonds At Critical Juncture, Dividends & Yields Galore (JNK, HYG, PHB, HYV, PHT, PHK, AWF, HIX, HIO)

Administrator — Fri, 20 Jan 2012 16:11:07 +0000

Junk bonds, or high-yield bonds are at a level that all income investors need to be paying attention to. After a big recovery in the sector and after the markets have gotten off to a good 2012, investors have a lot to consider in risk versus income opportunities. Standard & Poor’s tracks spreads of different bond grades over Treasuries and there is a definite growing appetite for risk. While the investment-grade spread came down 1 basis point to 219 basis points, investors will want to pay very close attention to the speculative-grade composite spread. This is junk bond investing, and that spread has tightened by 13 basis points to 691 basis points over Treasuries. Many investors are seeking these higher yields in the “risk-on” trading strategy and they need to consider the pros and the cons both here at this time.

SPDR Barclays High Yield Bond (NYSE: JNK) carries a 7.7% listed yield and is up 0.25% at $39.00 against a 52-week range of $34.09 to $40.93 and it is the primary ETF we look at when it comes to the world of high-yield or junk bonds. Then there is the iShares iBoxx High Yield Corporate Bond (NYSE: HYG) up 0.1% at $89.69 with close to a 7.7% yield and a 52-week range of $77.90 to $92.85, followed by the PowerShares Fundamental High Yield Corporate Bond Portfolio (NYSE: PHB) that is flat at $18.34 with a yield of about 6% and a 52-week range of $17.00 to $18.76. You have to consider that the 10-Year Treasury yields close to 2%, but high-yield and junk bonds often pay 7%, 8%, or more. Here are some of the top closed-end funds, although there are many more out there:

Blackrock Corporate High Yield (NYSE: HYV): market cap of $396 million with shares up 0.3% at $12.02; 52-week trading range of $10.10 to $12.60; implied yield of 8.5%.
Pioneer High Income Trust (NYSE: PHT): market cap of $480 with shares up 0.7% at $17.07; 52-week trading range of $14.12 to $18.08; implied yield of 9.6%.
PIMCO High Income Fund (NYSE: PHK): market cap of $1.5 billion with shares down 0.1% at $12.62; 52-week trading range of $10.52 to $14.88; implied yield of about 8.5%.
AllianceBernstein Global High Income Fund, Inc. (NYSE: AWF): market cap of $1.2+ billion with shares up 0.9% at $14.47; 52-week trading range of $12.43 to $15.41; implied yield of 8.3%.
Western Asset High Income Fund II Inc. (NYSE: HIX): shares are up 0.4% at $9.84; 52-week trading range of $8.35 to $10.45; implied yield of about 10.0%.
Western Asset High Income Opportunity Fund Inc. (NYSE: HIO): shares are up 0.8% at $6.32; 52-week trading range of $5.34 to $6.63; implied yield of 8.0%.

We do advise investors to study the current premium and discount that each closed-end fund trades at compared to the net asset value. Some are discounts and some are premiums, and these can fluctuate wildly through time for a myriad of reasons.

While that is a composite and while the “BB” is now under 500 basis points over Treasuries, the “B” spread is now under 750 basis points over Treasuries. Maturities matter here as the longer-dated notes and bonds command higher spreads than most shorter-dated instruments. Still, this could be the beginning of a wave of continued interest in junk bonds.

What is interesting is that rising yields in Treasuries implies losses on the face value of bonds. If the yields are rising because of an improving economic picture rather than because of inflation or because of a lack of faith in the underlying creditworthiness of the government, then the bond spreads are likely to contract further and that would drive the interest into high-yield junk bonds.

Be advised that not all junk bond funds are created equally outside of the ETFs. Some closed-end funds use domestic junk bonds only, while some use international bonds. Some include foreign-issue sovereign debt at junk levels or trading as though they are junk. Aslo, some use a bit of leverage while others do not. The dividend yields are “implied” because ethe closed-end funds pay monthly.

Another caveat needs to be mentioned… Some of the yields on financial quote screens also will differ from our implied yields because we do not include the capital gain distribution that comes with many of these. They of course count toward your total return, but we like to look at the most recent ‘regular dividend’ when calculating yields.

We have provided a chart for the “JNK” ETF Below so you can see how much this sector has risen since Thanksgiving and then again since the selling climax of stocks and risk instruments (including junk bonds) in early October.

A true chartist would tell you to watch this current level closely. If prices do not rise from here, it could be representative of a false break-out and that would imply a near-term top. As long as the “risk-on” mentality prevails, these should do well. The trick is watching longer-term Treasury yields. With close to a 2% yield on the 10-Year Treasury Note, investors will seek higher returns as long as those returns are likely to have at least some degree of price stability. If investors think that Treasury yields are likely to climb suddenly to 3% or even 4%, junk bonds will have some competition from the risk-free trade again.

As you would expect, there is no such thing as a free lunch in the financial markets.

JON C. OGG

Filed under: Bonds, Charts, Corporate Governance, Dividend, Economy, Editor's Picks, ETF, International Markets, Mutual Funds, Personal Finance, Value Investing Tagged: AWF, HIO, HIX, HYG, HYV, JNK, PHB, PHK, PHT

The 24/7 Wall St. 2012 Model Dividend Portfolio (AEP, AWK, T, GE, GOV, KMB, SNH, WMT, JNK, AMJ, AMLP, PGF, MO, DLR, EPD, KMP)

Administrator — Thu, 05 Jan 2012 19:41:33 +0000

It seems that most investors have started adding income or dividend reinvestment plans to their portfolios by using dividend stocks. With the yields of the 10-Year Treasury close to 2% and the 30-Year Treasury close to 3%, investors are looking elsewhere for investment income. 24/7 Wall St. has compiled its own 2012 Model Dividend Portfolio. It has some new names and some deletions from prior dividend lists due to price appreciation or fundamental changes.

It turns out that many stocks with high dividend yields are now more attractive than sovereign debt in the U.S. and abroad. Part of the allure, besides income or reinvestment, is that dividend stocks often hold up better than other investments during jittery markets. It is hard to imagine, but the high-yield utility sector was one of the top performers of the S&P in 2011. In some cases, half of an investor’s total return through time may come from dividends. Warren Buffett generally picks dividend-paying companies for Berkshire Hathaway Inc. (NYSE: BRK-A) after following some of the principles of Benjamin Graham.

The 24/7 Wall St. 2012 Model Dividend Portfolio includes the following stocks: American Electric Power Co., Inc. (NYSE: AEP); American Water Works Company, Inc. (NYSE: AWK); AT&T, Inc. (NYSE: T); General Electric Co. (NYSE: GE); Government Properties Income Trust (NYSE: GOV); Kimberly-Clark Corporation (NYSE: KMB); Senior Housing Properties Trust (NYSE: SNH); and Wal-Mart Stores Inc. (NYSE: WMT).

While exchange-traded products have been avoided in the past, recent trends merit a look at the open-end or closed-end mutual funds and ETF products as follows: SPDR Barclays Capital High Yield Bond (NYSE: JNK); JPMorgan Alerian MLP Index ETN (NYSE: AMJ); ALPS Alerian MLP ETF (NYSE: AMLP); and PowerShares Financial Preferred (NYSE: PGF).

Lastly, there have been some exits due to upside price performance: Altria Group Inc. (NYSE: MO); Digital Realty Trust Inc. (NYSE: DLR); Enterprise Products Partners LP (NYSE: EPD); and Kinder Morgan Energy Partners LP (NYSE: KMP).

We have described the features and outlook for each component of our Model Dividend Portfolio.

Filed under: Bonds, Compensation, Conglomerates, Corporate Governance, Dividend, Editor's Picks, ETF, Mutual Funds, Oil & Gas, Shareholder Issues, Special Report, Stock Buybacks, Tax, Tobacco, Utilities, Value Investing Tagged: AEP, AMJ, AMLP, AWK, BAC, BRK-A, DLR, EPD, GE, GOV, HBC, INTC, JNK, JPM, KMB, KMP, MET, MO, PGF, SNH, T, VZ, WFC, WMT

Top ETFs for the Market (FAS, RSX, RUSL, JNK, GLD)

Administrator — Mon, 28 Nov 2011 16:49:54 +0000

The market is surging on European hopes of the beginning of the end to the financial crisis, despite credit rating bantering out of credit ratings agencies. Now we just have to hope that Europe actually lives up to the hope. Here are some key ETFs on the move, with the emphasis not just around leveraged ETFs.

Direxion Daily Financial Bull 3X Shares (NYSE: FAS) is proving that financials can still manage to rally with the market. The move is up 9.% at $53.87, mostly erasing the damage of last week.

Market Vectors Russia ETF (NYSE: RSX) is a beneficiary if Europe’s woes may find a beginning of the end. This ETF is up 5.8% at $29.12, and the triple-leveraged Direxion Daily Russia Bull 3X Shares (NYSE: RUSL) is up a whopping 17.1% at $40.39.

SPDR Barclays Capital High Yield Bond (NYSE: JNK) is winning as spreads of junk bonds (and investment grade) tighten over Treasuries. These often act more like stocks than real treasury-tracking bonds, particularly when credit spreads are so wide.

SPDR Gold Shares (NYSE: GLD) proves yet again that it is not just tracking gold as the fear trade. Gold is becoming a risk-asset again and now mat be more tied to the performance of the S&P 500 Index rather than as “the fear trade” which we were so used to seeing.

JON C. OGG

Filed under: ETF, Trading Alert Tagged: FAS, GLD, JNK, RSX, RUSL

When Junk Bonds Are Just Priced Too Ugly (HYG, JNK, HYT, PHK, HYF)

Administrator — Mon, 10 Oct 2011 17:26:40 +0000

Barron’s is talking up junk-rated debt. We have been expecting that some media outlets would begin to notice how the spreads over Treasury yields were growing and growing and now offer 10% yields in some cases. This should only highlight more value in what has been a battered sector, even if there is no way to know if the true bottom has been put in.

Andrew Bary noted, “The junk-bond market has taken a big hit. It might fall some more, but patient investors will be rewarded. Anyone in search of income should take advantage of the hefty yields.” He noted that prices are down 10% since the end of July and noted that the junk spreads have widened out to about 900 basis points from just 475 basis points in April.

The market has not yet caught back on if the Europeans are going to come up with a solution that allows for investors to put their “risk” trades back on. The high dividends from interest collected in high-yield funds and ETFs have attracted investors for years and years when the investors believe the risk-reward is very favorable. When Treasury notes, bonds, and CDs pay so little, 8% and 9% spreads over Treasury yields should start attracting the vultures.

Two key ETFs for non-investment grade bonds are the iShares iBoxx High Yield Corporate Bond (NYSE: HYG) and the SPDR Barclays Capital High Yield Bond (NYSE: JNK) ETF. The iShares iBoxx High Yield Corporate Bond (NYSE: HYG) is up 2.1% at $85.13 and it has a $77.90 to $92.85 range over the last 52-weeks. The SPDR Barclays Capital High Yield Bond (NYSE: JNK) is up over 2% at $36.97, but it has a 52-week trading range of $34.09 to $41.32.

BlackRock Corporate High Yield Fund VI, Inc. (NYSE: HYT) is up 3.2% at $10.55 and its 52-week range is $9.94 to $12.23.

PIMCO High Income Fund (NYSE: PHK) is up some 4% at $11.84 and its 52-week range is $10.52 to $14.88.

Managed High Yield Plus Fund Inc. (NYSE: HYF) is up 3.7% at $1.94 and its 52-week trading range is $1.77 to $2.66.

Many of these were beaten up in sympathy with many other funds who had investments in sovereign debt of the PIIGS or in companies where the spreads were widening out substantially. Earning a spread of 4.75% above Treasuries is already high, but a spread of 8% or 9% higher than Treasury yields starts to become astronomical on a risk-reward basis. In short, a rise of that magnitude would be implying that expected default rates are going to rise from roughly under 2% to about 6% or more in the periods ahead.

If the United States manages to keep from falling back into a definite recession, the de facto yield spreads available in junk bonds have become a true bargain for income investors.

JON C. OGG

Filed under: Bonds, Dividend, Economy, ETF, Mutual Funds, Personal Finance, Shareholder Issues Tagged: HYF, HYG, HYT, JNK, PHK

Dividend Alternatives From High Yield Funds (HYG, JNK, PHIGX, USHYX, DVHYX, HIO, DHF, HYT)

Administrator — Wed, 08 Jun 2011 12:06:52 +0000

We have been screening our universe of the high-yield dividends for investors now that investors are growing more concerned each day and each week. Now we are looking at junk bond fund alternatives for those who want high yields for income yet still want the possible upside from appreciation through time. This category of securities consists of debt that is “Junk Rated” under the investment grades of “BBB/Baa,” but can also include convertible securities and preferred stock. Individually these all are risky in nature, but investing in mutual funds, open-end and closed-end, as well as ETFs are a way to significantly cut the risks for investors by eliminating default risk of any one or a small group of issuers. These securities are also higher up in the creditor food chain than the common stock if investors ever get too worried about economic viability.

We have screened out several high-yield securities classes and several liquid names for each. iShares iBoxx $ High Yield Corporate Bond Fund (NYSE: HYG) and SPDR Barclays Capital High Yield Bond (NYSE: JNK) are two of the more liquid and common go-to exchange-traded products for investors looking for ETFs and ETNs in the high-yield universe. In the open-end mutual funds, these are ranked the highest by Zacks with a “#1 Rank” that are also considered a Strong Buy analyst rating which implies that they will outperform peers. Some of the top open-ended mutual funds screened by Zacks were Putnam High Yield A (PHIGX), USAA High-Yield Opportunities (USHYX), and Transamerica Partners High Yield Bond (DVHYX). In the closed-end universe, we have shown the examples of Western Asset High Income Opportunity Fund Inc. (NYSE: HIO), Dreyfus High Yield Strategies Fund (NYSE: DHF), and BlackRock Corporate High Yield Fund VI, Inc. (NYSE: HYT).

iShares iBoxx $ High Yield Corporate Bond Fund (NYSE: HYG) aims to track the results of the price and yield performance, before fees and expenses, of the iBoxx $ Liquid High Yield index. The fund invests at least 90% of assets in securities that comprise the index, but it may invest up to 20% of assets in certain futures, options and swaps, cash and cash equivalents, and in bonds not included within the index. With a price of $90.59, the dividends fluctuate monthly but the yield is actually well above 7% and is up almost 5% so far this year.

Another popular high-yield ETF is one with most appropriate ticker of them all… SPDR Barclays Capital High Yield Bond (NYSE: JNK) seeks to track the Barclays Capital High Yield Very Liquid Index and it invests at least 80% of total assets in securities that comprise its benchmark index. With shares around $40.00, its trailing 12-month dividend profile is close to 8% in yield.

Putnam High Yield A (PHIGX) mostly invests in Junk-rated securities with maturity periods of three years or more. The fund may also utilize futures, options, warrants and swaps to minimize risk or to enhance portfolio returns. This high yield mutual fund returned 13.01% over the last one year period. This fund also carries an expense ratio of 1.04% compared to a category average of 1.18%.

USAA High-Yield Opportunities (USHYX) has a primary objective of high current income with a secondary objective of capital appreciation. At least 80% of its assets have to go into high-yield securities such as bonds, convertible securities and preferred stocks. The high yield mutual fund has a three year annualized return of 12.02%. Zacks noted that this fund actually held some 482 issues, with 6.88% of its total assets invested in iShares iBoxx $ High Yield Corporate Bond Fund (NYSE: HYG).

Transamerica Partners High Yield Bond (DVHYX) has a primary objective of high current income and it invests in high-yield debt securities and preferred stocks. Zacks noted that the mutual fund has a ten year annualized return of 8.43% and it has an expense ratio of 1.10% compared to a category average of 1.18%.

There is also the world of closed-end funds, where investors get some of the same characteristics of open-end mutual funds along with some characteristics of ETFs. Unfortunately, or fortunately, there is also the risk and reward of constant premiums or discounts to net asset values.

Western Asset High Income Opportunity Fund Inc. (NYSE: HIO) is one such closed-end fund. Its current payout comes to an annualized yield of about 8.4%. At $6.42, its 52-week range is $5.80 to $6.63, and its most recent premium to its net asset value was just over 2%.

Dreyfus High Yield Strategies Fund (NYSE: DHF) is a liquid closed-end fund with the example of a high premium over its net asset value. At $5.05, its 52-week range is $4.01 to $5.14, and it trades at a premium close to 19%. For such a premium, investors get a current payout rate close to 10% in yield.

BlackRock Corporate High Yield Fund VI, Inc. (NYSE: HYT) is another liquid closed-end fund that trades at a discount of close to 3% from its net asset value. At $11.94, its 52-week range is $10.37 to $12.23, and its current payout generates a yield of close to 8.2%.

Many of these funds and ETFs are allowed to use leverage, or they can invest in “alternatives” other than just corporate debt. If you broke out any individual security owned by these funds you will find almost none suitable for widows and orphans. When you package these together, let’s just say that it takes several standard deviation events before the default rates start to eat heavily into those dividend yields. Most importantly, please remember our most common investment mantra… “Regardless of what your objective, know what you are investing in.”

You are invited to join our free daily email distribution list to hear more about analyst upgrades and downgrades, top day trader and active trader alerts, dividend trends, news on Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.

JON C. OGG

Filed under: Bonds, Dividend, Economy, Editor's Picks, ETF, Mutual Funds, Personal Finance, Shareholder Issues Tagged: DHF, DVHYX, HIO, HYG, HYT, JNK, PHIGX, USHYX

Junk Bond Funds Losing Face On Treasury Yields (HIO, MHY, PHK, HYG, JNK)

Administrator — Mon, 13 Dec 2010 18:32:30 +0000

As the economic outlook continues to improve, lower Treasury bond prices and higher yields seem to be putting pressure on several of the key high-yield bond funds on the market seen in closed-end funds and in exchange-traded funds or exchange-traded notes. The rise in rates is happening at a faster rate than junk bond yield spreads over Treasuries. Still, the drops have been extreme as Treasury yields have risen rapidly.

Three of the more actively traded closed-end funds we track are Western Asset High Income Opportunity Fund Inc. (NYSE: HIO), Western Asset Managed High Income Fund Inc. (NYSE: MHY), and the PIMCO High Income Fund (NYSE: PHK). Those are not the only closed-end funds at all but they are three of our go-to funds. In ETF and ETN products we usually track iShares iBoxx High Yield Corporate Bond (NYSE: HYG) and the SPDR Barclays Capital High Yield Bond (NYSE: JNK). The junk-bond ETF universe has made out much better in recent days than the closed-end fund segment of junk bonds.

Western Asset High Income Opportunity Fund Inc. (NYSE: HIO) is down another 1.5% at $5.90 mid-Monday, and its last ex-date for a $0.045 dividend was November 17. Its website listed a 3.54% discount to an NAV of $6.21 but that is on its own site and may be delayed. Shares were at $6.22 after that and that was the highest close of late back on December 1. That represents a drop of some 5.1% this month so far. Its 52-week range is $5.39 to $6.58 and the current dividend yield is listed as roughly 9.0%.

Western Asset Managed High Income Fund Inc. (NYSE: MHY) is down over 2% Monday at $5.80 and its last ex-date for the $0.05 dividend was November 17. Its prior $5.93 price listed on the website was put at a 2.15% discount to its listed NAV of $6.06. Shares entered December at $6.30, indicating a larger drop of roughly 8%. Its 52-week range is $4.05 (from flash crash) and adjusted from roughly $5.50 to $6.74 in the last year and the current dividend yield is listed as roughly 9.6%.

PIMCO High Income Fund (NYSE: PHK) is down over 4% mid-Monday at $11.95, and that is listed on the PIMCO site as a 40% premium based on Friday data. It just went ex-dividend for its $0.121875 payout just last on December 9. On an adjusted close basis, the December high close was actually $13.14 just on December 7, for a standout drop of just under 10% (9.95%). Its 52-week range is $8.81 (from flash crash) and adjusted from roughly $10.95 to $13.73 in the last year and the current dividend yield is listed as roughly 12.2%.

The iShares iBoxx High Yield Corporate Bond (NYSE: HYG) is flat on the day at $89.39 is much higher priced and based on the iBoxx $ Liquid High Yield index. This one peaked just above $91.090 in early November and its last ex-date trade was December 1 with a $0.588 dividend.

The SPDR Barclays Capital High Yield Bond (NYSE: JNK) is down only $0.01 mid-Monday at $39.95 and December 1 was its ex-date trade for its $0.279 dividend. It has barely traded above $40.00 throughout December and has held up much better than its peers.

It is pretty evident that the two more active ETF/ETN products are holding up better than the closed-end fund segments. With more fluctuation between premium and discount to net asset values, closed-end funds often react more based upon buying demand versus seller supply of shares rather than the value of the underlying index comparisons. We’ll be looking here to see if the closed-end funds have reached levels interesting enough to consider.

JON C. OGG

Filed under: Bonds, ETF, Index, Trading Alert Tagged: HIO, HYG, JNK, MHY, PHK

Favorable ETF Trends Showing Inflows (FAS, FAZ, SPY, QQQQ, IJH, VWO, EEM, RSX, EWW, JNK, HYG, TBT)

Administrator — Sun, 18 Apr 2010 15:07:49 +0000

The end of this last week and weekend reviews showed how the highly volatile Direxion Daily Financial Bear 3X Shares (NYSE: FAZ) and the Direxion Daily Financial Bull 3X Shares (NYSE: FAS) were putting record volume for combined trading for the year 2010. After looking around at many of the weekend ETF reviews, while FAZ triple-bear grew and the FAS triple-bull saw outflows, it was interesting to see a report from Morningstar’s John Gabriel showing that Q1 was a period of strong inflows in ETF products. Not all categories, short-term and government bonds for instance, showed gains; but some funds on the larger list of ETF inflows was seen in SPDRs (NYSE: SPY), PowerShares QQQ (NASDAQ: QQQQ), and iShares S&P MidCap 400 (NYSE: IJH). In emerging markets, Vanguard Emerging Markets Stock ETF (NYSE: VWO) is seeing inflows while the iShares MSCI Emerging Markets Index (NYSE: EEM) is seeing outflows. Market Vectors Russia ETF (NYSE: RSX) and iShares MSCI Mexico Investable Market Index (NYSE: EWW) saw inflows in emerging market trends. On bonds, SPDR Barclays Capital High Yield Bond (NYSE: JNK) and iShares iBoxx $ High Yield Corporate Bond (NYSE: HYG), and then the double-short UltraShort 20+ Year Treasury ProShares (NYSE: TBT) were all capital inflow winners. These are just some of the winners, and the full article shows many of the losers with some obvious and some surprises in the outflows.

Morningstar’s John Gabriel noted, “Investors plowed some $19.7 billion into ETFs in March. Those inflows helped push total net inflows for the ETF industry to $7.7 billion for the first quarter of 2010.”

Read Full Article

Filed under: Bonds, Emerging Markets, ETF, Index, Mutual Funds Tagged: EEM, EWW, FAS, FAZ, HYG, IJH, JNK, QQQQ, RSX, SPY, TBT, VWO

Are Record Junk Bond Defaults & Outflows Growing Into Opportunities? (PHK, HIX, HYV, HYG, JNK)

247wallst — Sat, 18 Oct 2008 06:01:00 +0000

The recent turmoil in the credit markets has created problems for issues of the highest quality debt all the way down to the junkiest of junk bonds which trade at ratings under "BBB" or "Baa." When you have quality firms such as GE and Goldman Sachs paying nearly 10% for Warren Buffett to put on the corporate sweatshirt, and IBM forked out 8% for 30-year maturity debt.

Imagine the rate which companies of lower credit have to issue debtat to attract investors today. Now throw in outflows from fundmanagers who manage junk bond funds only adding to the lack of liquidity.AMG recently noted more than $470 million flowed out of junk bond fundsa week ago and said some $590 million was the latest week’s outflowsfrom junk bond funds. That is the equivalent of losing the assets ofseveral entire closed-end bond fund per week.

A week ago we saw a report from Moody’s showing that the junkdefault rate would rise sharply to 4.2% by the end of 2008. It alsosaid default rates could jump to a sharp 7.9% one year out. Moody’ssaid that September’s default rate of 2.8% was the highest in fouryears and double the rate of a year ago. Now S&P has put junkdefault rates at even higher levels. By September 2009 it seesdefaults reaching 7.6% and under its pessimistic scenario it noteddefault rates running possibly as high as 9.6%.

Reliant recently paid 14% for its capital depending upon yourcalculation. To make matters worse, many junk rated companies have tostart issuing debt again next year. If the credit markets stay verysoft along with highly volatile markets and a weakening economy withrecession numbers just hitting the tape, then many junk bond holdersare going to find themselves asking how much more risk they are willingto take on. Wait until defaults actually do start to post seriousgains and see how investors will treat the junk bond field.

Some of the closed-end funds and ETN’s below will spell out some ofthe carnage we are seeing as a result of recent volatility and creditmarket malaise:

The PIMCO High Income Fund (NYSE: PHK) closed down almost 3% Fridayat $7.04. This is down 50% from its 52-week high of $14.10, and theyield is now over the whopping 20% mark.

The Western Asset High Income Fund II Inc. (NYSE: HIX) closed upover 2% at $5.88 today and it too has nearly lost half of the valuefrom its 52-week highs. Its yield is roughly 18% at the currentdividend rates.

The BlackRock Corporate High Yield Fund V, Inc. (NYSE: HYV) closedup 4% Friday at $6.94 and it has also lost close to half its value overthe last year and now yields roughly 18% at current payout rates.

For an ETN, the iShares iBoxx $ High Yield Corporate Bd (AMEX: HYG)has lost more than 30% of its value from highs of the last year and itsdividend at current rates is north of 10% if those payouts are steady.

For another ETN, the SPDR Lehman High Yield Bond (NYSE: JNK) haslost close to one-third of its value and after a near-6% drop Thursdayand another 1% Friday its yield is over 12% at current payout rates.

At some point these will become almost too cheap to ignore. Junkbonds are at spreads and levels that have never been seen in most ofour careers. But the other issue is that investors have been fleeingthe sector relentlessly and we are formally just entering the recessionnow. Wait until investors actually start reading about all the junkquality bond defaults reaching levels that haven’t been seen since the1980′s since before a zany man named Michael Milken entered the stage.

Closed-end bond funds used to trade at high premiums to their net asset values, but now most trade at substantial discounts. Tight credit markets have always unlocked before. Bad times do always pass. In the end, there will have been one great opportunity to buy these funds at a major discount. Whether that time is now or in 2009 is still an unfinished chapter.

Jon C. Ogg
October 18, 2008

Posted in Bonds, Dividend, Economy Tagged: HIX, HYG, HYV, JNK, PHK

Junk Bond ETF Launch: SPDR Lehman High Yield Bond ETF (JNK)

247wallst — Tue, 04 Dec 2007 16:11:58 +0000

The American Stock Exchange launched trading in a new ETF today as the SPDR Lehman High Yield Bond ETF (Amex: JNK) by State Street Global Advisors.

JNK uses a passive management strategy designed to track the total return performance of the Lehman Brothers High Yield Very Liquid Index which measures the performance of publicly issued U.S. dollar denominated high yield corporate bonds with above-average liquidity.

This new ETF brings the total number of ETF listings on the Amex to a total of 377 ETF’s. It simultaneously launched stock options chains tied to it as well. JNK traded only 1,900 shares today.

Jon C. Ogg
December 4, 2007