BondBloxx BB-Rated USD High Yield Corporate Bond ETF

XBB

Market cap $315M

XBB is a well-structured, low-cost ETF offering diversified exposure to BB-rated high-yield bonds, ideal as a fixed income building block. Current market spreads are at historical lows, making XBB primarily a low-yield dividend play with limited upside and significant downside risk. Despite liking XBB's construction, we rate it a 'Sell' due to unfavorable risk/reward, especially when safer assets offer comparable yields.

While ETF popularity continues to grow, education remains key. Some advisors and investors use ETFs along with mutual funds or individual securities.

High yield bonds rated CCC are continuing to bring in strong results. Recent insight from BondBloxx noted that high yield bonds brought in a positive performance in March, led by junk bonds rated BB and CCC.

On Wednesday, Federal Reserve Chair Jerome Powell said that while interest rate cuts won't happen just yet, he believes cuts could be on the horizon. Powell added that he does not think the U.S. is heading toward a recession in the near term.

The outlook for U.S. high yield fixed income may be more constructive than investors realize. High yield is well-known for being riskier than other segments in the fixed income market; however, strong corporate fundamentals have strengthened the integrity of the asset class.

After a year when advisors were relatively cautious about taking on credit risk, sentiment seems to be shifting. In 2023, the most popular fixed income ETF was the iShares 20+ Year Treasury ETF (TLT).