Following an index change, SPDR now offers an ETF for ESG-aware investors seeking exposure to US high yield corporate bonds. This ETF can act as a core building block for investors looking to exclude certain types of controversy and to maximise the ESG score of the universe via positive screening.
Time to consider US high yield bonds?
Despite a bit of volatility during the late summer period, US high yield retains several features that could continue to appeal to fixed income investors.
As the name suggests, yields are measurably above many other types of investment. The yield to worst on the Bloomberg US Corporate High Yield Bond Index is more than 4% against around 1.2% for a Treasury index and 2.2% for a US investment grade (IG) exposure. While high yield is considered a risk-on exposure, the high yield and typically short duration means that yields have to rise more to offset the accrual effect on performance of the coupon than they do for Treasuries or IG exposures1.
As discussed in the latest Bond Compass, high yield performed well during the early stages of the 2014 taper of bond purchases by the Fed. Treasury yields declined and high yield spreads to Treasuries contracted. Crucially, looking ahead, the tapering process will only progress if growth holds up. Such a firm growth environment should create a favourable backdrop for high yield.
There is less scope for spreads to Treasuries to compress than there was in 2014 but equities remain buoyant on strong earnings and the upgrades versus downgrades ratio for Q4 remains well above 2 for both Moody’s and S&P.2
So the backdrop for high yield remains favourable, in our opinion, and the State Street Global Advisors fixed income client survey highlighted that investors are increasingly looking to integrate ESG exposure into their high yield portfolios. For this reason, as of 29 October 2021, the SPDR Bloomberg Barclays 0-5 Year U.S. High Yield UCITS ETF (ticker: SJNK) has changed its investment objective and been renamed SPDR Bloomberg SASB U.S. High Yield Corporate ESG UCITS ETF.
The ETF now seeks to track the performance of the fixed-rate, USD-denominated high yield corporate bond market, as represented by Bloomberg SASB US Corporate High Yield ESG Ex-Controversies Select Index. This index not only screens to exclude some of the more controversial issuers but also optimises bond allocations within the index to both maximise the ESG score and push its key characteristics toward the parent index (Bloomberg US Corporate High Yield Index). As such, it represents one of the only best-in-class ESG-screened high yield ETFs in the market.
To learn more about the ETF or the different indices tracking US high yield ESG indices, we invite you read our latest articles:
1Source: Bloomberg Finance L.P., as at 31 October 2021. The Bloomberg SASB US Corporate High Yield ESG Ex-Controversies Select Index has a yield to worst of 4.0% and a duration of 3.93 against the Bloomberg US Treasury Index which has a yield to worst of 1.14% and duration of 7.09 and the Bloomberg SASB US Corporate ESG Ex-Controversies Select Index which has a yield to worst of 2.19% and duration of 8.80.
2Source: Bloomberg Finance L.P., as at 31 October 2021. The upgrades to downgrades ratios for North American high yield are 2.64 for S&P and 3.06 for Moody’s.
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For Investors in Austria: The offering of SPDR ETFs by the Company has been notified to the Financial Markets Authority (FMA) in accordance with section 139 of the Austrian Investment Funds Act. Prospective investors may obtain the current sales Prospectus, the articles of incorporation, the KIID as well as the latest annual and semi-annual report free of charge from State Street Global Advisors Europe Limited, Branch in Germany, Brienner Strasse 59, D-80333 Munich. T: +49 (0)89-55878-400.F: +49 (0)89-55878-440.
For Investors in Finland: The offering of funds by the Companies has been notified to the Financial Supervision Authority in accordance with Section 127 of the Act on Common Funds (29.1.1999/48) and by virtue of confirmation from the Financial Supervision Authority the Companies may publicly distribute their Shares in Finland. Certain information and documents that the Companies must publish in Ireland pursuant to applicable Irish law are translated into Finnish and are available for Finnish investors by contacting State Street Custodial Services (Ireland) Limited, 78 Sir John Rogerson’s Quay, Dublin 2, Ireland.
For Investors in France: This document does not constitute an offer or request to purchase shares in the Company. Any subscription for shares shall be made in accordance with the terms and conditions specified in the complete Prospectus, the KIID, the addenda as well as the Company Supplements. These documents are available from the Company centralizing correspondent: State Street Banque S.A., Coeur Défense - Tour A - La Défense 4 33e étage 100, Esplanade du Général de Gaulle 92 932 Paris La Défense cedex France or on the French part of the site ssga.com/etfs. The Company is an undertaking for collective investment in transferable securities (UCITS) governed by Irish law and accredited by the Central Bank of Ireland as a UCITS in accordance with European Regulations. European Directive no. 2014/91/EU dated 23 July 2014 on UCITS, as amended, established common rules pursuant to the cross-border marketing of UCITS with which they duly comply. This common base does not exclude differentiated implementation. This is why a European UCITS can be sold in France even though its activity does not comply with rules identical to those governing the approval of this type of product in France.The offering of these compartments has been notified to the Autorité des Marchés Financiers (AMF) in accordance with article L214-2-2 of the French Monetary and Financial Code.
For Investors in Germany: The offering of SPDR ETFs by the Companies has been notified to the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) in accordance with section 312 of the German Investment Act. Prospective investors may obtain the current sales Prospectuses, the articles of incorporation, the KIIDs as well as the latest annual and semi-annual report free of charge from State Street Global Advisors Europe Limited, Branch in Germany, Brienner Strasse 59, D-80333 Munich. Telephone: +49 (0)89-55878-400. Facsimile: +49 (0)89-55878-440.
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For Investors in Spain: State Street Global Advisors SPDR ETFs Europe I and II plc have been authorised for public distribution in Spain and are registered with the Spanish Securities Market Commission (Comisión Nacional del Mercado de Valores) under no.1244 and no.1242. Before investing, investors may obtain a copy of the Prospectus and Key Investor Information Documents, the Marketing Memoranda, the fund rules or instruments of incorporation as well as the annual and semi-annual reports of State Street Global Advisors SPDR ETFs Europe I and II plc from Cecabank, S.A. Alcalá 27, 28014 Madrid (Spain) who is the Spanish Representative, Paying Agent and distributor in Spain or at spdrs.com. The authorised Spanish distributor of State Street Global Advisors SPDR ETFs is available on the website of the Securities Market Commission (Comisión Nacional del Mercado de Valores).
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United Kingdom: The Funds have been registered for distribution in the UK pursuant to the UK’s temporary permissions regime under regulation 62 of the Collective Investment Schemes (Amendment etc.) (EU Exit) Regulations 2019. The Funds are directed at 'professional clients' in the UK (as defined in rules made under the Financial Services and Markets Act 2000) who are deemed both knowledgeable and experienced in matters relating to investments. The products and services to which this communication relates are only available to such persons and persons of any other description should not rely on this communication. Many of the protections provided by the UK regulatory system do not apply to the operation of the Funds, and compensation will not be available under the UK Financial Services Compensation Scheme.
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Informationen zu Mexiko
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