Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Fight Low Rates in 2013 With These Bond ETFs

The iShares Barclays 20+ Yr Treas.Bond (NYSEARCA:TLT) and some other funds focused on Treasuries were on the receiving ends of post-election bounces on Wednesday. With investors departing equities and other riskier assets in force, U.S. Treasuries offered shelter from the storm on a day in which the market let the world know it was not pleased with the result of Tuesday’s presidential election.

iShares Dow Jones US Home Const. (ETF) (NYSEARCA:ITB)

The problem for bond investors remains that regardless of the election’s outcome, U.S. interest rates are expected to remain low until at least 2015. Federal Reserve Chairman Ben Bernanke said as much just two months ago when the third round of quantitative easing was announced.

Still, bond funds have seen robust inflows this year. Last month, the total was $4 billion, according to Morningstar data. That does not mean all those inflows are heading to boring Treasuries ETFs. Nor does finding superior bond yields mean investors have to take on excessive in the form of low credit quality. The following ETFs prove as much.

WisdomTree Dreyfus NZ Dollar Fund (NYSEARCA:AUNZ) Investors that opt for an ETF such as the WisdomTree Australia & New Zealand Debt Fund over a Treasuries fund are making a decent trade and the good news is that trade does not mean added risk. AUNZ’s distribution yield is 3.43 percent compared to 2.59 percent for AUNZ, but Australia has an AAA credit rating. The U.S. does not. New Zealand is rated AA.

As such, all of AUNZ holdings are rated AAA and AA. The risk here is of the currency varietal as AUNZ’s holdings are denominated in Australian and New Zealand dollars meaning U.S. dollar strength could weigh on this fund.

Market Vectors ETF Trust (NYSEARCA:PFXF) Common jargon refers to preferreds as stocks, but the asset class has intimate ties to the bond universe as well. Remember, a company that misses payments on preferred dividends risks damage to its corporate credit rating.

Specific to the Market Vectors Preferred Securities ex Financials ETF, the newly minted fund stands out from the crowd of preferred ETFs for two reasons. First, its expense ratio of 0.4 percent is the lowest in the group. Second, it is the only member of the group to not feature an excessive weight to preferred stocks issued by banks. Top holdings include issues from General Motors Company (NYSE:GM), United Technologies Corporation (NYSE:UTX) and Apache Corporation (NYSE:APA).

PFXF has a 30-day SEC yield of 6.2 percent and pays a monthly dividend. The credit rating breakdown is as follows: 48.1 percent of the holdings are investment grade while 18.6 percent are junk. The remainder of the fund’s holdings are not yet rated.

PowerShares Build America Bond Portfolio (NYSEARCA:BAB) The PowerShares Build America Bond Portfolio was predicted to be a winner under an Obama reelection scenario and that is exactly what happened. Two trading days after the election and BAB is up both days.

It is easy to understand why. President Obama wants to make the Build America Bonds program a permanent fixture, but the program was seen as vulnerable if he lost reelection. That worry is in the past. Now investors can enjoy BAB’s monthly dividend, a trailing 12-month yield of 4.8 percent and high-quality holdings. Eighty-nine percent of BAB’s portfolio has ratings ranging from A to AAA.

This article was originally written by The ETF Professor, and posted on Benzinga.

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!