Home Most Popular Unshaken High-Yield Bond Sectors Weathering Economic Winds

Unshaken High-Yield Bond Sectors Weathering Economic Winds


Amidst potential headwinds, the U.S. economy demonstrates unwavering resilience.

Recent data reveals a promising picture: state unemployment benefit claims saw a decline in the week ending March 16, and existing home sales surged by 9.5% in February, defying analyst predictions. These indicators suggest a potential growth trajectory for the economy.

Analysts are now revising their growth outlooks as well. TD Bank forecasts a slowdown in the U.S. economy later in the year, anticipating the Federal Reserve’s first rate cut to happen in July.

“Despite high-interest rates, the U.S. economy is confounding expectations. We still anticipate a slowdown later this year, but less severe than previously thought. The 2024 growth forecast of 2.3% is buoyed by last year’s strong performance, masking an anticipated slowdown to 1.6% by year-end,” TD Bank stated.

Capitalizing on Potential Returns through High-Yield Investments

As expectations for economic deceleration edge further into the future, traders and investors may benefit from potential returns in high-yield investments. While not immune to inflation, high-yield bonds tend to be less affected by inflation and interest rate changes compared to other assets.

Recent research by BondBloxx highlights that six out of seven high-yield sectors recorded positive total returns in February. BondBloxx offers various funds catering to individual high-yield sectors.

For instance, the BondBloxx USD High Yield Bond Energy Sector ETF (XHYE) focuses on energy sector high-yield bonds, ranging from oil refining to gas distribution. With a 13% increase over the past year, XHYE delivered the highest return in February at 0.5%.

The high-yield industrial sector has also seen significant gains as noted by the BondBloxx USD High Yield Bond Industrial Sector ETF (XHYI). This fund invests in junk bonds across various industrial segments like transportation and basic materials. XHYI reported a 0.3% return in February and has yielded an impressive 11.55% annually.

BondBloxx highlighted the consumer cyclicals sector’s robust performance, achieving a 0.4% increase in February. The BondBloxx USD High Yield Bond Consumer Cyclicals Sector ETF (XHYC) offers exposure to this sector and has shown a 14.14% gain over the past year.

High-yield sector investments provide a mix of high-risk and high-reward opportunities while targeting specific commercial sectors of interest. With six out of seven sectors reporting gains in February, there is potential for further growth.

BondBloxx manages 24 ETFs listed in the U.S. market, amounting to over $2.6 billion in assets under management.

For more news, information, and analysis, check out the Institutional Income Strategies Channel.

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The author’s viewpoints expressed here may not necessarily align with those of Nasdaq, Inc.