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A WisdomTree for Bond Exposure

04/07/2017 2:50 am EST

Focus: FUNDS

Bryan Perry

Editor, Cash Machine, Premium Income, Quick Income Trader, Instant Income Trader

So how do bond investors have their cake and eat it too? By investing in a short-term high-yield corporate bond portfolio that simultaneously shorts U.S. Treasuries. 

The WisdomTree Interest Rate Hedged High Yield Bond Fund (HYZD) is just the ticket for maintaining some bond exposure that has built in portfolio insurance. 

This ETF carries an expense ratio of only 0.43% and the Fund adjusts the interest-rate hedge on a monthly basis. The average coupon of the long high-yield bond portfolio is 6.87 years, with average years to maturity of 3.38 years and an average yield to maturity of 5.67%. 

The current distribution yield is 5.53% and the fund pays monthly $0.11 per share the last week of each month. I see the 3-5 year timeframe of the bond curve as the most attractive place to own bonds. 

As the economy further improves, so will the creditworthiness of the underlying portfolio holdings. HYZD is a nice fit for our Safe Haven Portfolio for those investors who want very low volatility offered by short-term corporate bonds that are fully hedged against rising rates. 

I also would consider this ETF as a great place to park cash and get five times what money markets are paying. Buy HYZD under $24.25. 

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