SPHY ETF

SPHY is a simple high-yield corporate bond ETF. SPHY offers a strong 7.7% yield, low 0.05% expense ratio, and consistent outperformance, making it a compelling high-yield corporate bond ETF. Despite above-average default rates, economic conditions and potential Fed cuts support the stability of non-investment grade bonds.

Junk bonds offer high yield but come with default risk, which may be mispriced in the current economic cycle. SPDR® Portfolio High Yield Bond ETF provides exposure to diversified high-yield bonds with a low expense ratio. The SPHY fund holds investment-grade corporate bonds with diverse maturities and yields, with a sector composition focused on Consumer Cyclicals, Communications, and Energy.

Anna Paglia, Executive Vice President and Chief Business Officer for State Street Global Advisors, joins CNBC's Bob Pisani on ‘ETF Edge' on the ‘Halftime Report' to discuss the rotation into small caps, the value trade and more.

SPDR Portfolio High Yield Bond ETF has delivered a decent total return of 17.3% since we initiated our bullish view 18 months ago. However, high-yield bonds are no longer as deeply discounted and attractive enough to generate meaningful alpha in our view. By rotating into investment-grade bonds, we remain well-positioned to benefit from eventual rate cuts by the Fed while avoiding the potential downside risk of high-yield spreads widening.

SPDR Portfolio High Yield Bond ETF faces significant credit risk headwinds due to economic softening. The ETF's option-adjusted spread, paired with its duration figures, spell excess credit duration influence. Credit migration could play a role later this year as speculative grade, BB, and BB interest coverage ratios are fading.

Bond market volatility has been unusually low, raising concerns about potential market shocks and skewed expectations. High-yield bonds, such as SPHY, have low yield spreads to Treasuries, meaning they're trading at a premium today. Betting against SPHY through put options may be a good short opportunity due to its low implied volatility and potential for a crash by 2025.

The SPDR Portfolio High Yield Bond ETF is a large and highly diversified high yield ETF. The Fund's performance has been modest since inception and is diminished materially by taxes and inflation. Investors are not adequately compensated for the risks associated with the Fund.

Key indicators suggest the SPDR® Portfolio High Yield Bond ETF might benefit from price returns in the coming quarters. Although the exchange-traded fund's historical returns primarily derived from dividends, a tactical opportunity exists for those seeking price returns. In our opinion, investors will soon "down credit" and "down duration" amid receding market risk premiums coupled with an improving U.S. current account.