NEW YORK ( TheStreet) -- The spike in long-term U.S. Treasury yields has many investors believing the bond bubble has finally popped. But there's still money to be made in bonds and bond ETFs.TheStreet searched for the best bond ETF ideas with Tom Lydon, editor of ETF Trends, and Christian Magoon, CEO of Magoon Capital. SPDR Barclays Capital High Yield Bond ETF ( JNK) High-yield, or junk, bonds are a good place to find steady yield during a low-interest-rate environment. Lydon says the SPDR Barclays Capital High Yield Bond ETF is a good place for investors seeking those elevated yields, provided they can handle the extra risk. The fund normally invests at least 80% of total assets in securities that comprise its benchmark index. At last check, the yield on JNK was 9.7%. "Now is a great time for corporations because liquidity is returning to the markets, default rates are dropping and they are sitting on nearly $2 trillion in cash. An improving environment coupled with yields that remain handsome make high-yield corporate debt an appealing destination if you don't mind the risks," says Lydon.
Pimco's Enhanced Short Maturity Strategy ETF ( MINT) Pimco's Enhanced Short Maturity Strategy ETF targets the short-term cash equivalent market of one year or less. It is an actively managed transparent ETF delivering PIMCO's proven fixed-income investment expertise at an appealing price point of 35 basis points. "With massive amounts of cash sitting on the sidelines, investors may want to look at short-term strategies that seek to minimize interest-rate risk and deliver income. Pimco's Enhanced Short Maturity Strategy ETF is a smart place to be if this is your outlook," says Magoon.
Market Vectors Emerging Markets Local Currency Bond ETF ( EMLC) The Market Vectors Emerging Markets Local Currency Bond ETF owns over 150 emerging-market government bonds in about 15 countries. In addition, the ETF provides the added benefit of exposure to local emerging-market currencies, which stand to benefit from quickening economic growth. This ETF charges 49 basis points, a bargain for the exposure it delivers to hard-to-access local currency emerging-market bonds, says Magoon. "For a more aggressive-income investor, emerging-market government bonds may be appealing because emerging markets offer attractive growth-to-debt ratios in comparison to most developed-market bonds. In addition, emerging-market bonds generally deliver higher yields than developed bonds due to their greater risks," says Magoon.
ProShares UltraShort 20+ Year Treasury ETF ( TBT) If long-term Treasury bond prices keep sliding, Lydon advises investors to check out the ProShares UltraShort 20+ Year Treasury ETF. This ETF seeks daily investment results, before fees and expenses, that correspond to twice the inverse (think opposite) of the daily performance of the Barclays Capital 20+ Year U.S. Treasury Bond Index. It invests the rest of the assets in money-market instruments. "Joblessness is coming down, economic reports are showing progress and investors are returning to the markets. All this recovery means the Fed will raise rates at some point and when that happens, long-term bond prices will fall while yields rise, and that will propel TBT higher," says Lydon.
Readers Also Like: