• Latest
  • Trending
  • All

In a market starved for yield, one ETF offers close to 9%. Here’s how it works

August 28, 2020 14:33
Dollar lacks upside momentum due to lower Treasury yields

Dollar comes off fresh lows in volatile trading

May 27, 2022 06:55
Investor sentiment mixed in thinner pre-holiday deals

Investors cautiously optimistic ahead of the weekend

May 27, 2022 04:15
Dollar lacks upside momentum due to lower Treasury yields

USD back under pressure as market sentiment improves

May 26, 2022 06:57
Downbeat tone ahead of news from the US

Markets digest FOMC meeting minutes

May 26, 2022 06:46
Dollar lacks upside momentum due to lower Treasury yields

Dollar off one-month lows as bulls reenter the game

May 25, 2022 06:12
Market sentiment worsens across the world

Stocks bounce after another widespread sell-off

May 25, 2022 04:54
Dollar lacks upside momentum due to lower Treasury yields

Greenback trims losses, but stays offered nearly across the board

May 24, 2022 06:12
Global stocks in recovery mode but still cautious

Stocks back under pressure after short-lived relief rally

May 24, 2022 04:42
Dollar lacks upside momentum due to lower Treasury yields

Dollar keeps bleeding as bearish correction continues

May 23, 2022 06:27
Markets digest the inflation shock, dollar enjoys the rally

Dollar sags as investor sentiment keeps improving

May 23, 2022 05:09
Dollar lacks upside momentum due to lower Treasury yields

USD treads water after plunge, markets steady ahead of the weekend

May 20, 2022 06:21
Investor sentiment looks neutral at the start of the week

Modest bounce after sell-off ahead of the weekend

May 20, 2022 04:51
  • Terms & Сonditions
  • Contact
Saturday, May 28, 2022
FWNews - pulse of the forex market
  • FUNDAMENTALS
    Investor sentiment mixed in thinner pre-holiday deals

    Investors cautiously optimistic ahead of the weekend

    Downbeat tone ahead of news from the US

    Markets digest FOMC meeting minutes

    Market sentiment worsens across the world

    Stocks bounce after another widespread sell-off

    Global stocks in recovery mode but still cautious

    Stocks back under pressure after short-lived relief rally

    Markets digest the inflation shock, dollar enjoys the rally

    Dollar sags as investor sentiment keeps improving

    Investor sentiment looks neutral at the start of the week

    Modest bounce after sell-off ahead of the weekend

    Geopolitical tensions ease but risks persist

    Global stock rout continues on growth fears

    Chinese data spooks investors, sentiment turns sour

    Stock markets turn directionless after a bounce

    Sentiment turns sour, dollar steadies ahead of the weekend

    USD gives up gains as risk sentiment improves further

  • TECHNICALS
  • Interest Rates
  • Economic calendar
  • Backstage
No Result
View All Result
FWNews - pulse of the forex market
  • FUNDAMENTALS
    Investor sentiment mixed in thinner pre-holiday deals

    Investors cautiously optimistic ahead of the weekend

    Downbeat tone ahead of news from the US

    Markets digest FOMC meeting minutes

    Market sentiment worsens across the world

    Stocks bounce after another widespread sell-off

    Global stocks in recovery mode but still cautious

    Stocks back under pressure after short-lived relief rally

    Markets digest the inflation shock, dollar enjoys the rally

    Dollar sags as investor sentiment keeps improving

    Investor sentiment looks neutral at the start of the week

    Modest bounce after sell-off ahead of the weekend

    Geopolitical tensions ease but risks persist

    Global stock rout continues on growth fears

    Chinese data spooks investors, sentiment turns sour

    Stock markets turn directionless after a bounce

    Sentiment turns sour, dollar steadies ahead of the weekend

    USD gives up gains as risk sentiment improves further

  • TECHNICALS
  • Interest Rates
  • Economic calendar
  • Backstage
No Result
View All Result
FWNews - pulse of the forex market
No Result
View All Result

Home » In a market starved for yield, one ETF offers close to 9%. Here’s how it works

In a market starved for yield, one ETF offers close to 9%. Here’s how it works

by FWNews
August 28, 2020 14:33
in News
0

Yield is a bit like a hot commodity these days.

With the Federal Reserve keeping its benchmark interest rates near zero until at least 2022, investors are flocking to popular bond exchange-traded funds for income.

Here are the yields for some of the market’s most-loved bond ETFs:

  • iShares Core U.S. Aggregate Bond ETF (AGG): 1.2%
  • iShares Core U.S. Aggregate Bond ETF (LQD): 2.3%
  • iShares Core U.S. Aggregate Bond ETF (MUB): 2.4%
  • iShares Core U.S. Aggregate Bond ETF (HYG): 6.3%

Higher-yielding funds tend to come with more risk, meaning they could be subject to more volatility than their lower-yielding counterparts.

But that can be part of a strategy, Amplify ETFs founder and CEO Christian Magoon told CNBC’s “ETF Edge” on Monday.

Enter the iShares Core U.S. Aggregate Bond ETF (YYY), a portfolio of 30 closed-end funds that boasts a yield of nearly 9%. Closed-end funds list on exchanges just like stocks and raise capital through initial public offerings but unlike ETFs do not create new shares or buy back existing ones.

“The odd thing about closed-end funds is that they often trade below their net asset value, meaning you could buy them at a discount to what the actual securities are valued,” Magoon said. “YYY’s index seeks to own 30 that have kind of the highest blend of discount to NAV as well as distribution rate.”

YYY’s portfolio is a mix of stock and bond funds managed by some of the biggest names in ETFs including BlackRock and Legg Mason. Currently, the group is trading at a 13% discount to its net asset value, which produces “high current income,” Magoon said.

“The current SEC yield on YYY is 8.85%. How can we do that? Essentially, we’re buying a dollar’s worth of assets for 87 cents,” the CEO said. “This is a more volatile income investment from an NAV standpoint. The trade-off is you should get quite a bit more high current income over time.”

He added that YYY is often used in income-focused barbell strategies to balance more “low-volatility, conservative income investments.”

John Davi, founder and chief investment officer of Astoria Portfolio Advisors, wasn’t so open to the idea of buying a basket of closed-end funds.

“If you’re going to take on the risk of owning a financial asset, you should be compensated for taking that risk,” he said in the same “ETF Edge” interview. “I just don’t think that happens in closed-end funds.”

First, it’s critical to know that closed-end funds may never stop trading at discounts to their NAVs, he said. Second, he stressed the importance of looking at an investment’s total return versus just its yield.

For instance, while YYY has roughly the same level of volatility as the iShares Core U.S. Aggregate Bond ETF (SPY), SPY produced a total return of 50% over the last three years while YYY returned only about 2%, Davi said.

“I think there’s other ways to generate yield if people are just going to be purely focused on yield,” he said. “LQD, I think, is attractive from a yield perspective. I think iShares Core U.S. Aggregate Bond ETF is attractive from a yield perspective. Even iShares Core U.S. Aggregate Bond ETF, the high-yield muni ETF, I think is pretty attractive. All those have much lower standard deviations [and] higher total returns, so, on a yield-per-unit-of-risk basis, I think that you’re better off in those areas compared to closed-end funds.”

YYY closed less than half of 1% higher on Thursday.

Share2Tweet1
ADVERTISEMENT
FWNews

FWNews

Track the pulse of the market

Related Posts

Dollar lacks upside momentum due to lower Treasury yields
Technical analysis

Dollar comes off fresh lows in volatile trading

May 27, 2022 06:55
13
Investor sentiment mixed in thinner pre-holiday deals
Fundamental analysis

Investors cautiously optimistic ahead of the weekend

May 27, 2022 04:15
13
Dollar lacks upside momentum due to lower Treasury yields
Technical analysis

USD back under pressure as market sentiment improves

May 26, 2022 06:57
15
Downbeat tone ahead of news from the US
Fundamental analysis

Markets digest FOMC meeting minutes

May 26, 2022 06:46
20
Dollar lacks upside momentum due to lower Treasury yields
Technical analysis

Dollar off one-month lows as bulls reenter the game

May 25, 2022 06:12
20
Market sentiment worsens across the world
Fundamental analysis

Stocks bounce after another widespread sell-off

May 25, 2022 04:54
21

Leave Your Opinion Cancel reply

Your email address will not be published. Required fields are marked *

Recommended

Dollar lacks upside momentum due to lower Treasury yields

Greenback steadies after a technical sell-off

March 10, 2022 05:15
11

Bank of Canada announces 2020-21 scholarship recipients

February 17, 2021 14:45
11
Pound corrects higher due to dollar weakness

Greenback struggles to regain upside momentum at the start of the week

April 26, 2021 07:22
17

Ads

Shneider Electric

Most Popular

A slow start to the week in FX markets
Technical analysis

Dollar regains ground to start the week

January 25, 2021 07:25
118
A slow start to the week in FX markets
Technical analysis

Greenback advances modestly amid strong data

May 28, 2021 07:38
110
Kim Jong Un reportedly says his nuclear weapons guarantee there will be no more war
News

Kim Jong Un reportedly says his nuclear weapons guarantee there will be no more war

July 28, 2020 08:29
95
FWNews

Copyright © 2020 FWNews

  • Terms & Сonditions
  • Contact
No Result
View All Result
  • FUNDAMENTALS
  • TECHNICALS
  • Interest Rates
  • Economic calendar
  • Backstage

Copyright © 2020 FWNews