2 ETFs Focusing On High Yield Bonds

The U.S. Federal Reserve will kick-off its two-day monetary policy meeting today. The Fed is likely to keep its benchmark interest rates unchanged, however, the central bank could announce further rate hikes later in year. Interest rates in the U.S. though still remain at record low levels. In Canada, the Bank of Canada had announced two rate cuts last year. With the economy still under pressure due to weakness in oil and commodity prices, the Canadian central bank is likely to keep rates low for a considerable period.

For yield hungry investors, high yield corporate bonds are an attractive proposition in the current environment. However, high yield corporate bonds also carry risk, which is why retail investors should consider investing in them through ETFs.

BMO Floating Rate High Yield ETF (TSX: ZFH) and BMO High Yield U.S. Corporate Bond Hedged Index ETF (TSX: ZHY) are two ETFs that provide exposure to high yield bonds. ZFH provides exposure to high yield credit with minimal duration risks. The Fund invests in CAD T-Bills targeting an average weighted maturity of 90 days to minimize interest rate risk. ZHY has been designed to replicate the performance of the Barclays Capital U.S. High Yield Very Liquid Index CAD Hedged net of expenses.

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