Posted on 05/12/2011
Of the $1.1 trillion dollars in ETF assets, $1.37 billion (or about 12.3%) is in non-leveraged long fixed income ETFs, and interestingly, one of the ten largest ETFs by assets under management (AUM) is one of these fixed income ETFs, the iShares Barclays TIP Index (TIP) (source: www.nsx.com). Needless to say, fixed income is a sizable segment of the broad market in general; and the asset class has recently gotten more publicity as the highly popular and successful bond manager Bill Gross of PIMCO has announced the launch of an actively managed ETF managed by Gross.
With that said, and given that 2011 is about a third of the way over, we thought we would take a look at what has been happening in the bond ETF area this year. Excluding leverage and inverse bond ETFs, we see that the best performing fixed income ETFs have established a couple of themes within the asset class -- international bonds, corporates, and inflation protected bonds are among the strongest fixed income vehicles. The best performing fixed income ETF so far this year has been the SPDR DB International Government Inflation-Protected Bond ETF (WIP) which is up 6.21% (excluding dividends). Out of 126 non-leveraged and non-inverse fixed income ETFs, only six are posting a loss for the year and all of those losses are less than 1%.
Out of those 126 fixed income ETFs, the highest yielding fund is currently the SPDR Barclays Capital High Yield Bond (JNK) which has a yield of 8.39%. There are currently 18 fixed income ETFs which have a yield of 5% or higher and they are listed below. On the low end, the smallest yield is the iShares 2014 S&P AMT-Free Municipal Series (MUAC), which pays 1.34%. Of course, there is never a free lunch on Wall Street so higher yields are typically associated with higher risk. For instance, from January 2004, the JNK fell from a high of about 55 down to a low of about 26 in early 2009. Since hitting that low in 2009, the JNK has rallied to a current price of 40.73.