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Investors in U.S. junk bonds are showing increasing caution toward riskier debt. An index of CCC-rated bonds fell nearly 0.8% over the past month ended Thursday, underperforming the broader high-yield market, per Bloomberg, as quoted on Yahoo Finance.
Meanwhile, distressed U.S. dollar loans surged to $71.8 billion at the end of October, the highest level since President Donald Trump unveiled his tariff policy in April. State Street SPDR Bloomberg High Yield Bond ETF (JNK - Free Report) has gained about 0.4% past month and about 1% so far this year (as of Nov. 7, 2025).
Flight to Safety Evident in Credit Spreads
Spreads between investment-grade bonds and junk bonds have widened over the last week, indicating investors’ preference for safer debt. There was an outflow of $1.3 billion from bank loan exchange-traded funds (ETFs) in October — the biggest monthly outflow from the sector since April — according to data compiled by Bloomberg Intelligence, the above-mentioned report showed.
Winning Junk Bond ETFs in Focus
Against this backdrop, below we highlight the winning junk bond ETFs of this year.
First Trust Senior Loan Fund (FTSL - Free Report) – Up 0.4% past month, down 0.7% YTD, yields 7.29% annually
iShares High Yield Corporate Bond BuyWrite Strategy ETF (HYGW - Free Report) – Up 0.6% past month, down 5.4% YTD, yields 12.89% annually
First Trust Tactical High Yield ETF (HYLS - Free Report) – Up 0.4% past month, up 1.1% YTD, yields 6.89% annually
iShares Interest Rate Hedged High Yield Bond ETF (HYGH - Free Report) – Up 0.7% past month, down 0.3% YTD, yields 7.03%
Invesco Senior Loan ETF (BKLN - Free Report) – Up 0.8% past month, down 0.6% YTD, yields 7.11%
What Lies Ahead?
Despite recent weakness, the junk bond market is far from collapsing. Spreads remain below their 2025 average. In July, investors heavily bought CCC bonds, the Bloomberg article indicated. In September, risk premiums on high-yield bonds approached their lowest levels of the year, even after two high-profile bankruptcies, the same article revealed.
The Fed started enacting rate cuts from September. The central bank may make the monetary policy easier ahead. This will likely drag down the bond yields and drive up the treasury bond prices. The high-yield or junk market may lose its appeal, if the safer ones gain in prices.
However, investors with a strong stomach for risks, may tap junk bond ETFs to earn a sizable current income. Meanwhile, investment-grade corporate bond ETFs like iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD - Free Report) can be tracked closely. The ETF LQD has gained about 3.7% this year, lost 0.5% past month and yields 4.39% annually.
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Pain Ahead for Junk Bond ETFs?
Investors in U.S. junk bonds are showing increasing caution toward riskier debt. An index of CCC-rated bonds fell nearly 0.8% over the past month ended Thursday, underperforming the broader high-yield market, per Bloomberg, as quoted on Yahoo Finance.
Meanwhile, distressed U.S. dollar loans surged to $71.8 billion at the end of October, the highest level since President Donald Trump unveiled his tariff policy in April. State Street SPDR Bloomberg High Yield Bond ETF (JNK - Free Report) has gained about 0.4% past month and about 1% so far this year (as of Nov. 7, 2025).
Flight to Safety Evident in Credit Spreads
Spreads between investment-grade bonds and junk bonds have widened over the last week, indicating investors’ preference for safer debt. There was an outflow of $1.3 billion from bank loan exchange-traded funds (ETFs) in October — the biggest monthly outflow from the sector since April — according to data compiled by Bloomberg Intelligence, the above-mentioned report showed.
Winning Junk Bond ETFs in Focus
Against this backdrop, below we highlight the winning junk bond ETFs of this year.
First Trust Senior Loan Fund (FTSL - Free Report) – Up 0.4% past month, down 0.7% YTD, yields 7.29% annually
iShares High Yield Corporate Bond BuyWrite Strategy ETF (HYGW - Free Report) – Up 0.6% past month, down 5.4% YTD, yields 12.89% annually
First Trust Tactical High Yield ETF (HYLS - Free Report) – Up 0.4% past month, up 1.1% YTD, yields 6.89% annually
iShares Interest Rate Hedged High Yield Bond ETF (HYGH - Free Report) – Up 0.7% past month, down 0.3% YTD, yields 7.03%
Invesco Senior Loan ETF (BKLN - Free Report) – Up 0.8% past month, down 0.6% YTD, yields 7.11%
What Lies Ahead?
Despite recent weakness, the junk bond market is far from collapsing. Spreads remain below their 2025 average. In July, investors heavily bought CCC bonds, the Bloomberg article indicated. In September, risk premiums on high-yield bonds approached their lowest levels of the year, even after two high-profile bankruptcies, the same article revealed.
The Fed started enacting rate cuts from September. The central bank may make the monetary policy easier ahead. This will likely drag down the bond yields and drive up the treasury bond prices. The high-yield or junk market may lose its appeal, if the safer ones gain in prices.
However, investors with a strong stomach for risks, may tap junk bond ETFs to earn a sizable current income. Meanwhile, investment-grade corporate bond ETFs like iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD - Free Report) can be tracked closely. The ETF LQD has gained about 3.7% this year, lost 0.5% past month and yields 4.39% annually.