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New Bond ETFs Solve Age-Old Problem

NEW YORK ( TheStreet) -- An important part of building a bond portfolio is creating a reliable income stream.

That task has been difficult to do with exchange traded funds. The reason is that an ETF, such as the iShares 10+ Year Credit Bond Fund (CLY), will always target the same maturity, and income will rise or fall as investors snap up or dump individual securities.

Claymore is attempting to mitigate that problem with a new suite of corporate bond funds that mature like individual bonds. For example, all of the bonds in the Claymore BulletShares 2016 Corporate Bond ETF (BSCG) mature in 2016 and the fund itself will liquidate at the end of that year.

Here's the lineup:

Claymore BulletShares 2011 Corporate Bond ETF

Claymore BulletShares 2012 Corporate Bond ETF

Claymore BulletShares 2013 Corporate Bond ETF

Claymore BulletShares 2014 Corporate Bond ETF

Claymore BulletShares 2015 Corporate Bond ETF

Claymore BulletShares 2016 Corporate Bond ETF

Claymore BulletShares 2017 Corporate Bond ETF

The concept is a big improvement in enabling investors to get closer to locking in a yield. A couple of years from now, any buying interest in, for example, the 2017 fund would likely mean that the fund would have to buy bonds in the open market that mature in 2017. New purchases to meet that demand would be at prevailing rates, higher or lower. This could affect the yield of the fund.

Another potential snag would be if one of the bonds in the fund defaulted. On that point, it's worth noting that all of the ETFs are dominated by bonds from financial companies. The exposures range from 40% for the 2016 to 56% for the 2015 fund. Though many of the banks in the fund were "too big to fail," that doesn't future impairments won't take place. Still, financial companies issue the most bonds, so many fixed-income investors are in the same boat.
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