Three High Yield Corporate Bond ETFs For 2012

As confidence in a sustainable economic recovery continues to remain wary, unemployment remains high, the equity markets remain volatile and consumer demand grows at a snail’s pace, high yield corporate bonds, and the exchange traded funds that track them, could pose an opportunity for investors. 

One of the biggest reasons that these bond ETFs have appeal is the widening spread between the yields they offer as compared to those offered by US Treasuries.   Some of these high-yield instruments offer 12-month yields greater than 7% as compared to a mere 0.11% offered on a 12-month Treasury note. 

5 ETFs To Play Rising Prices

As the US government has resorted to excessive spending measures to keep the economy from completely crumbling, many investors suggest that inflation is inevitable and is likely to prevail in the near term future.

Current economic data suggest that inflation is relatively tame, but prices are on the rise.  In April, the Consumer Price Index, also known as the CPI, rose by 3.2 percent from a year earlier marking the fourth straight month of rising prices.  Furthermore, these increases in prices had already emerged in the retail sector as rising prices of cotton, wheat, sugar, crude oil and other raw materials have forced companies like Starbucks (SBUX), McDonalds (MCD) and Levi Strauss to raise prices and pass the impact through to the consumer.  

Two New ETFs For European Bond Markets

Despite the economic uncertainty that continues to prevail in Europe, New York-based ETF provider, Van Eck Global, recently filed plans to launch two new ETFs that will enable investors to play the European bond markets.

According to the filings with the Securities and Exchange Commission, the first fund is expected to be the Market Vectors Sovereign Bond ETF which is expected to be designed to track the performance of local currency-denominated bonds of sovereign issuers located in Europe, excluding Russia.  Furthermore, bonds eligible for inclusion in the Index must be issued by European country governments, sovereigns, quasi-sovereigns or government-backed entities and must be rated “Baa3” or above by Moody’s or “BB-” or above by S&P or Fitch for long-term debt obligations and equivalent ratings for short-term debt obligations.

Seven ETFs To Fight Inflation

Although current US economic data indicates that inflation is relatively subdued, there are numerous reasons to suggest that rising prices are on the horizon.

Rising commodity prices have already prevailed as demand for corn, wheat and soybeans around the world continues to outpace supply and political unrest has sent the price of WTI crude oil north of $109 per barrel.  Furthermore, inflation has already prevailed in much of the developing world causing the People’s Bank of China to increase its benchmark one-year lending rate to 6.31 percent and its one-year deposit rate to 3.25 percent.  A similar tune was heard in India, when its central bank raised the cost of borrowing for the eighth time in nearly one year. 

Three ETFs To Play Emerging Market Debt

As developing nations continue to draw investor attention, opportunities in developing market debt may present a viable opportunity.

To not much surprise, many have been turning to developing nations mainly due to their aggregate, or combined, size and expected exponential growth compared to the United States in the near future.   In fact, a recent study indicates that 97% of the world’s population, 75% of its economic production and nearly 67% of stock market capitalization is outside of the United States.

5 ETFs To Hedge Against Inflation

As the US government has resorted to excessive spending measures to keep the economy from completely crumbling, many investors suggest that inflation is inevitable and could even prevail in the coming months. 

Current economic data suggest that inflation is running lower than expected; however there are numerous reasons to think that inflation will eventually be inevitable.  Some of these reasons include the Federal Reserve’s implementation of QE2, which launched in early November, the increases in money supply in the earlier stages of the Great Recession to ignite a spark in the US economy and rising commodity prices are likely to take their toll on the consumer price index (CPI).  In fact, rising prices have already started to emerge, evident through the recent rise in energy prices (i.e. crude oil and gasoline), food prices (i.e. wheat, sugar, coffee and soybeans) and airline tickets. 

9 ETFs To Play Currency Debasement

As developing nations continue to implement loose monetary policies, keep interest rates low and boost money supply, a nation’s debt and currency debasement should me of much concern. 

Most recently, a study indicated that the U.S. national debt has ballooned nearly 12 fold over the last 30 years.  Additionally, over this same time span the ratio of debt to GDP has gone from nearly one-third to 85%.  During this time of exploded debt, GDP has only expanded 5.3 times, indicating that debt is growing at twice as fast as the U.S. economy.  Similar trends have been seen in Europe, in particularly Greece, Spain and Portugal.

Some concerns of this exponential growth in debt include hyperinflation, as a result of printing more currency, a decline in the value of a nation’s currency, better known as currency debasement, and increased costs of borrowing, which make it difficult to chip away at deficits.

WisdomTree Files For Actively Managed Emerging Market Bond ETFs

In an attempt to broaden its horizons, ETF provider WisdomTree Investments, recently filed paperwork with the Securities and Exchange Commission to provide actively managed emerging market bond ETFs.

According to the filing, the first ETF of the proposed three, would be the WisdomTree Asia Bond Fund,  which seeks to offer broad exposure to Asian government and corporate bonds.  Furthermore, the fund intends to invest in fixed income securities denominated in the local currency of countries in Asia.  Particularly, the fund is expected to focus its investments in China, Hong Kong, India, Indonesia, South Korea, Malaysia, Philippines, Singapore, Taiwan and Thailand. 

3 ETFs To Play Brazilian Bonds

As talks of a bubble forming in the US bond market continue to prevail, many investors have turned to the Brazilian bond market and for good reason.

According to investment data firm, EPFR Global, international bond fund managers have infiltrated the Brazilian bond markets to the tune of $5.2 billion of assets as of September 22, 2010, more than double that seen in 2009.  Furthermore inflows into Brazilian bonds account for more than 10% of all inflows into emerging market bonds.  Lastly, local Brazilian government.

Currently, local Brazilian government bonds are yielding more than 11 percent on one-year bonds and are expected to continue to do so as demand is expected to remain strong, especially from countries with low interest rates, suggests Kenneth Rapoza of Barrons. 

PIMCO Introduces Build America Bond ETF

Pimco, one of the world’s largest bond firms, just launched its latest municipal exchange traded fund (ETF), the Pimco Build America Bond Strategy Fund (BABZ).

 BABZ will carry an expense ratio of 0.45% and aims to achieve its investment objective in focusing its asset base on taxable municipal debt securities which are publicly issued under the President Obama’s Build America Bond program.  Furthermore, the fund generally invests in U.S. dollar denominated fixed income instruments that are investment grade but may allocate a percentage of assets to higher yield junk bonds which have a higher likelihood of default. 

In regards to characteristics of Build America Bonds, they are special municipal bonds designed to help municipalities raise money to invest in infrastructure projects.  The bonds are taxable; however, the Federal government pays a 35% subsidy on the interest payments to offset the tax hit.   Additionally, issuance of Build America Bonds will cease on December 31, 2010 unless the relevant provisions of the American Recovery and Reinvestment Act of 2009 are extended. In the event that the Build America Bond program is not extended, the Build America Bonds outstanding at such time will continue to be eligible for the federal interest rate subsidy, which continues for the life of the Build America Bonds; however, no bonds issued following expiration of the Build America Bond program will be eligible for the federal tax subsidy.