This high-yield ETF could find opportunities in the “uncertain” banking sector

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Several of the largest banks in the United States posted lackluster quarterly results, with many citing higher spending, rising inflation and potential losses from exposure to Russia as key drivers of their losses.

Last week, JPMorgan Chase & Co., Citigroup Inc., Wells Fargo & Co., Goldman Sachs Group Inc.and Morgan Stanley all reported double-digit declines in first-quarter earnings. Monday, Bank of America Corp. followed suit, reporting a 12% drop in first-quarter profits. All but Bank of America recorded lower earnings.

While the quarter was previously seen as a return to normal for U.S. banks, Russia’s invasion of Ukraine, record inflation and the Federal Reserve’s rate hike for the first time since 2018 upended expectations. recovery plans for the global economy.

“The macroeconomic outlook for the remainder of the year can only be described as complex and uncertain,” Citigroup CEO Jane Fraser said. tell investors.

Jamie Dimon, Chairman and CEO of JP Morgan, said in the company’s statement tax return“We remain optimistic on the economy, at least in the near term – consumer and business balance sheets as well as consumer spending remain at healthy levels – but we foresee significant geopolitical and economic challenges ahead.”

Dimon is also quoted in the the wall street journal saying the risks associated with war in Ukraine and rising inflation have increased, adding: “These are very powerful forces, and these things are going to collide at some point. Nobody knows what will happen. »

Investors seeking precise, index-based exposure to high-yielding assets within the banking space may consider the BondBloxx US High Yield Financial and REIT Sector ETF (NYSE Arca: XHYF)which targets the banking, financial services, insurance and REIT sub-sectors.

XHYF is newly organized, non-diversified and seeks to track the investment results of the ICE Diversified US Cash Pay High Yield Financial & REIT Index, which is a rules-based index comprised of lower quality US dollar-denominated bonds which contains issuers from the financial sector, including the banking, financial services and insurance sub-sectors, as well as the REIT sector.

XHYF is one of seven US high-yield bond ETFs that BondBloxx launched in February to provide precise, index-based exposure to the high-yield asset class and enable investors to diversify and manage industrial sector risk.

BondBloxx was founded by ETF industry leaders Leland Clemons, Joanna Gallegos, Elya Schwartzman, Mark Miller, Brian O’Donnell and Tony Kelly. The team has collectively built and launched over 350 ETFs in companies including BlackRock, JPMorgan, State Street, Northern Trust and HSBC.

According to the issuer, more and more institutional investors recognize the role that bond ETFs can play in their portfolios, even in times of volatility. They can provide short-term liquidity while providing a more efficient way to keep portfolios balanced. Sector ETFs make it possible to add intentional tactical inclinations to their portfolios. They can also improve price discovery, even when transparency is low or the underlying securities are not trading.

“One of our goals at BondBloxx is to educate the market about the variation in yields in credit markets,” Schwartzman said. “An important but unrecognized source of outperformance for investors is the dispersion of returns within broader categories of the bond market, particularly in times of market dislocation.”

For more news, insights and strategy visit the Institutional Income Strategies Channel.

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