Dernières nouvelles pour Invesco Senior Loan ETF (ARCA:BKLN)

Invesco Senior Loan ETF

PowerShares Exchange-Traded Fund Trust ETF

The Fund generally will invest at least 80 percent of its total assets in the components of the Underlying Index. Strictly in accordance with its guidelines and mandated procedures, Morningstar, Inc. (Morningstar or the Index Provider) compiles, maintains and calculates the Underlying Index, which tracks the market value weighted performance of the 100 largest institutional leveraged loans based on market weightings, spreads and interest payments. Invesco Capital Management LLC (the Adviser) and the Funds sub-adviser, Invesco Senior Secured Management, Inc. (the Sub-Adviser), define senior loans to include loans referred to as leveraged loans, bank loans and/or floating rate loans. Banks and other lending institutions generally issue senior loans to corporations, partnerships or other entities (borrowers). These borrowers operate in a variety of industries and geographic regions, including foreign countries. To be included in the Underlying Index, leveraged loans must be senior secured, denominated in U.S. dollars and must have a minimum initial term of one year and a minimum initial issue size of dollar 50 million. A leveraged loan is typically rated below investment grade quality or is unrated but deemed to be of comparable quality.

Premier U.s. Government Portfolio

Days after warning of a potential &#8220;market dysfunction&#8221; in the U.S. Treasury market, economist Craig Shapiro has signaled a significant shift, suggesting the &#8220;Fed put&#8221; might be nearing activation.
What Happened: In a recent X post, Shapiro pointed to the rapid escalation of conditions he previously outlined, stating, &#8220;Less than 3 days later, we are here: UST market dysfunction.&#8221;
Shapiro, the macro strategist at 3-Circle Investments by the Bear Traps Report, said in his <a href="https://www.benzinga.com/25/04/44661029/trump-and-fed-stand-firm-lack-of-a-put-could-drive-the-market-lower-very-quickly-warns-expert">analysis earlier this week</a> that the Federal Reserve would only intervene when financial stability becomes a risk, specifically triggered by a malfunctioning Treasury market.
According to him, factors like forced deleveraging, basis trade unwinds, or foreign repatriation could initiate such a scenario. These conditions could now be materializing after the U.S. imposed 104% tariffs on China, which has shot the 10-year and 30-year Treasury yields up, amid a market correction.
While investors move toward reliable fixed income instruments during market turmoil, which should lower the bond yields, the contrary rise in yields suggests multiple possibilities.
Moody&#8217;s Analytics Chief Economist Mark Zandi suggested to <a href="https://www.resiclubanalytics.com/p/housing-market-homeowner-equity-buffer-according-to-batchservice">ResiClub</a> that the <a href="https://www.benzinga.com/news/global/25/04/44705797/high-stakes-high-yields-investors-puzzled-with-us-treasuries-defiant-run-amid-market-turmoil">sharp yield increase</a> is likely caused by hedge funds selling Treasuries to cover margin calls on their stock positions. On the other hand, some experts have pointed out that China could be selling U.S. Treasuries in response to heavy tariffs.
&#8220;Buying more gold which will anticipate the Fed&#8217;s reaction,&#8221; said Shapiro, revealing his investment strategy based on the expectation of central bank intervention.
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<blockquote class="twitter-tweet" data-width="500" data-dnt="true">Well, that escalated quickly. &quot;Fed Chair Powell is only going to flinch when financial stability becomes a risk which happens when the UST market begins to dysfunction&#8230;Now if the UST market starts to sell off because of forced deleveraging, basis trade unwinds or foreign… <a href="https://t.co/MtFaQG3oOx">https://t.co/MtFaQG3oOx</a>
&mdash; Craig Shapiro (@ces921) <a href="https://twitter.com/ces921/status/1909853436037767363?ref_src=twsrc%5Etfw">April 9, 2025</a></blockquote>
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See Also: <a href="https://www.benzinga.com/government/regulations/25/04/44705659/cathie-wood-points-to-serious-liquidity-issues-as-overnight-borrowing-rate-spreads-widen-on-spiking-treasury-yields-this-crisis-is-calling-out-for-some-kind-of-mar-a-lago-accord">Cathie Wood Points To &#8216;Serious Liquidity Issues&#8217; As Overnight Borrowing Rate Spreads Widen On Spiking Treasury Yields: &#8216;This Crisis Is Calling Out For Some Kind Of Mar-a-Lago Accord&#8217;</a>
Why It Matters: Ed Yardeni of Yardeni Research suggests that "Fixed-income investors may be starting to worry that the Chinese and other foreigners might start selling their U.S. Treasuries." He adds, &#8220;The good news is that the Fed Put will probably make a quick comeback if this happens.&#8221;
Yardeni&#8217;s data showed the high-yield corporate spread widening to 407 bps by April 7th, signaling reduced investor confidence and economic concerns. Consequently, ETFs like iShares iBoxx $ High Yield Corporate Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/HYG#NYSE">HYG</a>) and Invesco Senior Loan ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/BKLN#NYSE">BKLN</a>), which invest in high-yield corporate bonds and senior loans, have plunged 3.64% and 2.75% over the past five days, respectively.
Economist Peter Schiff warned that without an immediate rate cut and massive QE, the market could face a 1987-style crash.
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<blockquote class="twitter-tweet" data-width="500" data-dnt="true">As I warned earlier, the Treasury market is crashing. The yield on the 10-year just hit 4.5%, and the yield on the 30-year just hit 5%. Without an emergency rate cut tomorrow morning and the announcement of a massive QE program, tomorrow could be a 1987-style stock market crash.
&mdash; Peter Schiff (@PeterSchiff) <a href="https://twitter.com/PeterSchiff/status/1909822222534955101?ref_src=twsrc%5Etfw">April 9, 2025</a></blockquote>
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<a href="https://www.benzinga.com/government/regulations/25/04/44705659/cathie-wood-points-to-serious-liquidity-issues-as-overnight-borrowing-rate-spreads-widen-on-spiking-treasury-yields-this-crisis-is-calling-out-for-some-kind-of-mar-a-lago-accord">Growing liquidity concerns</a> are evident in the widening 3-year SOFR swap spread, a key indicator of liquidity in the U.S. banking system. Ark Invest&#8217;s Cathie Wood urges a swift resolution through a trade agreement and aggressive Fed intervention, stating, &#8220;No more time to waste.&#8221;
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<blockquote class="twitter-tweet" data-width="500" data-dnt="true">As Zerohedge notes, this swap spread is suggesting serious liquidity issues in the US banking system. This crisis is calling out for some kind of Mar-a-Lago Accord on free trade, in tandem with serious support from the Fed? No more time to waste. <a href="https://t.co/5VXYqLJemJ">https://t.co/5VXYqLJemJ</a>
&mdash; Cathie Wood (@CathieDWood) <a href="https://twitter.com/CathieDWood/status/1909816910033678801?ref_src=twsrc%5Etfw">April 9, 2025</a></blockquote>
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Price Action: The SPDR S&amp;P 500 ETF Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SPY#NYSE">SPY</a>) and Invesco QQQ Trust ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/QQQ#NASDAQ">QQQ</a>), which track the S&amp;P 500 index and Nasdaq 100 index, respectively, were lower in premarket on Wednesday. The SPY was down 1.80% to $487.56, while the QQQ declined 1.67% to $409.12, according to <a href="https://pro.benzinga.com/dashboard">Benzinga Pro</a> data.
As of Tuesday, the Nasdaq 100 has been in bear market territory, having fallen 23.10% from its prior peak of 22,222.61. The S&amp;P 500 also saw a significant decline of 18.95% from its Feb. 19 high of 6,147.43, while the Dow Jones was down 16.48% from its 52-week high.
Read Next:
<ul>
<li><a href="https://www.benzinga.com/25/04/44705972/ford-motor-general-motors-to-witness-higher-demand-as-american-automotives-reap-the-fruit-of-protectionism-says-e">Ford, GM To Witness &#8216;Higher Demand&#8217; As American Carmakers Set To &#8216;Reap The Fruit Of Protectionism,&#8217; Says Expert: Here&#8217;s A List Of Potential Gainers And Losers From Trump Tariffs</a></li>
</ul>
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BKLN

Shapiro's Treasury 'Market Dysfunction' Warning Hits Home: 'Buying More Gold' As Fed Put May Be On The Table

Following a jump in the U.S. Treasury yields, the Secured Overnight Financing Rate (SOFR) swap spreads have widened, signaling a &#8220;serious liquidity&#8221; issue, according to Ark Invest&#8217;s Cathie Wood. Experts believe that only the government and the Federal Reserve&#8217;s intervention would be able to contain this crisis.
What Happened: SOFR is a benchmark interest rate that reflects the cost of borrowing cash overnight, and it is used as a reference rate for various financial transactions.
On the other hand, the SOFR swap spread is the difference between the fixed rate in a SOFR-based interest rate swap and the yield on a government bond of the same maturity.
This surge in SOFR swap spread is a result of the dramatic rise in the 10-year Treasury bond yields, which are up from a recent low of 3.87% on April 4, which was two days after the &#8220;Liberation Day,&#8221; to 4.44% at the time of writing.
According to Wood, a widening negative SOFR swap spread is sending a distress signal pointing to a potential crisis of liquidity in U.S. banks.
She argues that this crisis necessitates a geopolitical solution through a trade agreement, which she terms the &#8220;Mar-a-Lago Accord,&#8221; and a monetary policy solution through aggressive intervention by the Federal Reserve.
She further underscores the severity of the situation by adding that there is &#8220;No more time to waste&#8221;.
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<blockquote class="twitter-tweet" data-width="500" data-dnt="true">As Zerohedge notes, this swap spread is suggesting serious liquidity issues in the US banking system. This crisis is calling out for some kind of Mar-a-Lago Accord on free trade, in tandem with serious support from the Fed? No more time to waste. <a href="https://t.co/5VXYqLJemJ">https://t.co/5VXYqLJemJ</a>
&mdash; Cathie Wood (@CathieDWood) <a href="https://twitter.com/CathieDWood/status/1909816910033678801?ref_src=twsrc%5Etfw">April 9, 2025</a></blockquote>
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Adding to this, Joseph Wang, the CIO at Monetary Macro said in an X post, &#8220;If the White House wants lower 10 year yields they need to speed up banking regulation reforms.&#8221;
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<blockquote class="twitter-tweet" data-width="500" data-dnt="true">Big tightening in SOFR swap spreads. If the White House wants lower 10 year yields they need to speed up banking regulation reforms. <a href="https://t.co/19PlN9cI4a">pic.twitter.com/19PlN9cI4a</a>
&mdash; Joseph Wang (@FedGuy12) <a href="https://twitter.com/FedGuy12/status/1909686590668259624?ref_src=twsrc%5Etfw">April 8, 2025</a></blockquote>
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See Also: Bear <a href="https://www.benzinga.com/25/04/44683084/bear-markets-hit-harder-and-last-longer-during-recessions-heres-a-historical-look-at-bear-market-severity-and-duration">Markets Hit Harder And Last Longer During Recessions, Says Strategist</a>
Why It Matters: The surge in yields suggests that bond prices are falling amid an ongoing market correction. Simplistically, this indicates that investors, who traditionally prefer investing in bonds during a stock market crash, are liquidating their positions. However, there is more at play here.
After President Donald Trump levied 104% tariff duties on China after the latter&#8217;s retaliation, Ed Yardeni of Yardeni Research suggests that &#8220;Fixed-income investors may be starting to worry that the Chinese and other foreigners might start selling their U.S. Treasuries.&#8221;
Moreover, the credit markets are also starting to show signs of stress as the yield spread between the high-yield corporate bond composite and the 10-year Treasury bond is widening rapidly.
According to the data shared by Yardeni, the high-yield corporate spread stood at 407 basis points as of April 7, indicating reduced investor confidence, economic slowdown, or recession fears.
Consequently, ETFs that invest in high-yield corporate bonds and in senior bank loans are starting to plunge.
The iShares iBoxx $ High Yield Corporate Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/HYG#NYSE">HYG</a>) and Invesco Senior Loan ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/BKLN#NYSE">BKLN</a>) are down 3.64% and 2.75%, respectively, over the last five days.
&#8220;The good news is that the Fed Put will probably make a quick comeback if this happens,&#8221; said Yardeni.
Additionally, highlighting his concerns about rising yields, economist Peter Schiff said, &#8220;Without an emergency rate cut tomorrow morning and the announcement of a massive QE program, tomorrow could be a 1987-style stock market crash.&#8221;
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<blockquote class="twitter-tweet" data-width="500" data-dnt="true">As I warned earlier, the Treasury market is crashing. The yield on the 10-year just hit 4.5%, and the yield on the 30-year just hit 5%. Without an emergency rate cut tomorrow morning and the announcement of a massive QE program, tomorrow could be a 1987-style stock market crash.
&mdash; Peter Schiff (@PeterSchiff) <a href="https://twitter.com/PeterSchiff/status/1909822222534955101?ref_src=twsrc%5Etfw">April 9, 2025</a></blockquote>
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Price Action: As of Tuesday&#8217;s close, the Nasdaq 100 index was in bear market territory, down 23.10% from its previous record of 22,222.61 points. S&amp;P 500 was 18.95% lower from its latest Feb. 19 high of 6,147.43 points. Whereas, Dow Jones was 16.48% lower than its 52-week high of 45,073.63 points. 
The yield on the two-year Treasury stood at 3.77%, and the long-term 30-year bond yielded 4.92%. The SPDR S&amp;P 500 ETF Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SPY#NYSE">SPY</a>) and Invesco QQQ Trust ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/QQQ#NASDAQ">QQQ</a>), which track the S&amp;P 500 index and Nasdaq 100 index, respectively, declined on Tuesday.
The SPY was down 1.57% to $496.48, while the QQQ advanced 1.80% to $416.06, according to <a href="https://pro.benzinga.com/dashboard">Benzinga Pro</a> data.
On Wednesday, the future of Dow was lower by 2.32%, the S&amp;P 500 future declined 2.58%, and the Nasdaq 100 was down 2.63%.
Read Next:
<ul>
<li><a href="https://www.benzinga.com/25/04/44679385/market-enters-risk-off-mode-as-analyst-predicts-this-signal-flashing-warnings-similar-to-2020-and-2008-crisis">Market Enters &#8216;Risk-Off&#8217; Mode As Analyst Predicts This Signal Flashing Warnings Similar To 2020, 2008 Crisis</a></li>
</ul>
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ETFs

Cathie Wood Points To 'Serious Liquidity Issues' As Overnight Borrowing Rate Spreads Widen On Spiking Treasury Yields: 'This Crisis Is Calling Out For Some Kind Of Mar-a-Lago Accord'

Tech stocks once again led the market lower on Wednesday as the difficult 2022 for Wall Street continued. But bad news in the market for ETF investors is good news for ETF short sellers.
There is currently $241 billion in aggregate ETF short interest in the U.S. market, according to S3 Partners. S3 analyst Ihor Dusaniwsky said Wednesday that ETF short interest has decreased by $13.9 billion in the past 30 days.
Most Shorted ETFs: By far the most heavily shorted ETF is the SPDR S&amp;P 500 ETF Trust (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/spy#NYSE">SPY</a>). The SPY ETF tracks the S&amp;P 500 and represents a simple bet against the U.S. stock market and/or a hedge against long positions in U.S. stocks. Here are the top four most shorted U.S. ETFs, according to S3:
Related Link: <a href="https://www.benzinga.com/analyst-ratings/analyst-color/22/06/27906019/nio-analyst-dismisses-short-seller-allegations-remains-bullish">Nio Analyst Dismisses Short Seller Allegations: Why They&#39;re Bullish On Chinese EV Stock</a>
<ul>
<li>SPY ETF, $69.4 billion in short interest.</li>
<li>PowerShares QQQ Trust, Series 1 (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/qqq#NASDAQ">QQQ</a>), $22.7 billion in short interest.</li>
<li>iShares Russell 2000 Index (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/iwm#NYSE">IWM</a>), $18.7 billion in short interest.</li>
<li>iShares iBoxx $ High Yield Corporate Bond ETF (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/hyg#NYSE">HYG</a>), $8.1 billion in short interest.</li>
</ul>
Recent Short Seller Targets: Overall, Dusaniwsky said traders have been ramping up bets against bond ETFs as interest rates rise.
Related Link: <a href="https://www.benzinga.com/short-sellers/22/06/27813704/short-seller-spruce-point-targets-generac-alleges-numerous-shady-m-a-deals">Short Seller Spruce Point Targets Generac, Alleges &#39;Numerous Shady M&amp;A Deals&#39;</a> 
&ldquo;The $3.34 billion of net ETF short selling over the past 30 days saw the biggest moves in the &#39;hedging ETFs&#39; with the Spider S&amp;P 500 ETF (SPY), iShares iBoxx $ Investment Grade Corp Bond ETF (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/lqd#NYSE">LQD</a>) and iShares 20+ Year Treasury Bond ETF (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/tlt#NYSE">TLT</a>) having $6.2 billion of new short selling over the last thirty days and the iShares Russell 3000 ETF (IWM) with $1.9 billion of short covering,&rdquo; he said.
In addition to the IWM ETF, short sellers have also been aggressively covering bets against the Consumer Staples Select Sector SPDR Fund (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/xlp#NYSE">XLP</a>), iShares Expanded Tech-Software Sector ETF (BATS: <a class="ticker" href="https://www.benzinga.com/stock/igv#BATS">IGV</a>) and Invesco S&amp;P 500 Eql Wght ETF (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/rsp#NYSE">RSP</a>) funds as well.
Finally, for investors looking for the next ETF short squeeze candidate, S3 ranked the following four funds as the most crowded short trades, based on S3&#39;s Crowded Score metric:
<ul>
<li>Invesco Senior Loan ETF (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/bkln#NYSE">BKLN</a>), 92.5 Crowded Score.</li>
<li>IWM ETF, 87.5 Crowded Score.</li>
<li>HYG ETF, 87.5 Crowded Score.</li>
<li>SPDR S&amp;P Retail ETF (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/xrt#NYSE">XRT</a>), 87.5 Crowded Score.</li>
</ul>
Benzinga&rsquo;s Take: The general theme of the information above is that investors are betting against bond ETFs, likely in anticipation of higher interest rates ahead. At the same time, short sellers appear to be dialing back their exposure to consumer staples and software stocks.

Short Sellers

Trading Ideas

Rydex ETF Trust Rydex S&P Equal Weight ETF

iShares Trust Barclays 20+ Year Treasury Bond Fund

ETF Short Sellers Targeting Bond ETFs As Interest Rates Rise

Invesco Senior Loan ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/BKLN#NYSE">BKLN</a>) shares experienced unusual options activity on Monday. The stock price moved up to $22.02 following the option alert. 
<ul>
<li>Sentiment: BEARISH</li>
<li>Option Type: TRADE</li>
<li>Trade Type: PUT</li>
<li>Expiration Date: 2021-09-17</li>
<li>Strike Price: $21.00</li>
<li>Volume: 25000</li>
<li>Open Interest: 5</li>
</ul>
<h2>Three Indications Of Unusual Options Activity</h2>
One way options market activity can be considered unusual is when volume is exceptionally higher than its historical average. The volume of options activity refers to the number of contracts traded over a given time period. The number of unsettled contracts that have been traded, but not yet closed, is called open interest. These contracts are not yet closed because a buyer has not purchased the contract, or a seller has not sold it.
The trading of a contract with an expiration date in the distant future is another sign of unusual activity. Generally, additional time until a contract expires increases the potential for it to reach its strike price and grow its time value. Time value is important in this context because it represents the difference between the strike price and the value of the underlying asset. 
Contracts with a strike price far from the underlying price are also considered unusual because they are defined as being "out of the money". This occurs when the underlying price is under the strike price on a call option, or above the strike price on a put option. These trades are made because the underlying asset value is expected to change dramatically in the future, and the buyer or seller can take advantage of a greater profit margin. 
<h2>Bullish And Bearish Sentiments</h2>
Options are "bullish" when a call is purchased at/near ask price or a put is sold at/near bid price. Options are "bearish" when a call is sold at/near bid price or a put is bought at/near ask price. 
These observations are made without knowing the investor's true intent by purchasing these options contracts. The activity is suggestive of these strategies, but an observer cannot be sure if a bettor is playing the contract outright or if the options bettor is hedging a large underlying position in common stock. For the latter case, bullish options activity may be less meaningful than the exposure a large investor has on their short position in common stock.
<h2>Trading Options With These Strategies</h2>
Unusual options activity is an advantageous strategy that may greatly reward an investor if they are highly skilled, but for the less experienced trader, it should remain as another tool to make an educated investment decision while taking other observations into account.
For more information to understand options alerts, visit <a href="https://pro.benzinga.help/en/articles/1769505-how-do-i-understand-options-alerts" title="https://pro.benzinga.help/en/articles/1769505-how-do-i-understand-options-alerts">https://pro.benzinga.help/en/articles/1769505-how-do-i-understand-options-alerts</a>

Movers

Unusual Options Activity Insight: Invesco Senior Loan ETF

Leveraged loans, also known as senior loans, are embraced by bond investors as interest rates rise due in large part to the floating component sported by these bonds, which helps mitigate sensitivity to higher interest rates.
Exchange traded funds, such as the Invesco Senior Loan ETF (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/bkln#NYSE">BKLN</a>), make leveraged loans more accessible to a broader swath of investors.
<h3>What Happened</h3>
BKLN tracks the S&amp;P/LSTA U.S. Leveraged Loan 100 Index and is the largest ETF dedicated to leveraged loans. Year-to-date, BKLN has traded modestly lower, incurring losses that are significantly lower than those of more traditional, longer-dated bond ETFs.
Rates on leveraged loans float, but traditional junk bonds have fixed interest rates that remain constant until the bond matures. Senior loans are also considered attractive because they offer high yields, are collateral secured and, historically, have <a href="https://www.etftrends.com/senior-loan-etfs-bolstered-by-solid-economic-numbers/">lower default rates</a> than traditional high-yield corporate bonds.
&ldquo;With expectations of higher rates ahead, leveraged loans remain highly attractive for market participants, due to their feature of coupon reset at a spread over a floating index (mostly the three-month LIBOR rate),&rdquo; said S&amp;P Dow Jones Indices <a href="http://www.indexologyblog.com/2018/10/24/leveraged-loans-in-a-rising-rate-environment-carry-factor-dominates/">in a recent note</a>.
<h3>Why It&#39;s Important</h3>
Leveraged loans and ETFs such as BKLN aren&#39;t designed to be significant drivers of capital appreciation, but there have been periods when the asset class impressed on that front.
Since the S&amp;P/LSTA U.S. Leveraged Loan 100 Index&#39;s January 2002 inception, &ldquo;except during the global financial crisis of 2008-2009, the price return of the index has been stable and flat. In an orderly market, loans don&rsquo;t provide much price appreciation due to the combination of floating LIBOR rate, lack of call protection, and possible refinancing at lower spreads,&rdquo; said S&amp;P Dow Jones Indices.
During that period, BKLN&#39;s index more than doubled. The ETF is seven and a half years old and is up nearly <a href="https://www.invesco.com/portal/site/us/financial-professional/etfs/product-detail?productId=BKLN">3.3&nbsp;percent since inception</a>, as of Sept. 30.
BKLN has a 30-day SEC yield of 4.32 percent, which is below the yields of standard junk bond ETFs, but well above what investors get with investment-grade corporates or Treasuries.
&ldquo;Though the spreads for loans have decreased since 2016, rising LIBOR rates have more than offset the spread narrowing and have pushed index yield to increase since 2017. The lower loan spreads also partially reflect the improving credit quality of the loan index,&rdquo; according to S&amp;P Dow Jones.
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<a href="https://www.benzinga.com/news/earnings/18/10/12580015/with-earnings-looming-gas-up-with-these-etfs">Warm Up To These Nat Gas ETFs</a>
<a href="https://www.benzinga.com/analyst-ratings/analyst-color/18/10/12580019/a-cheap-international-etf-trip">This ETF Is Really Cheap</a>

Long Ideas

Specialty ETFs

What To Expect From Leveraged Loan ETFs As Rates Rise

With investors continuing their search for income and yield, bank loan or senior loan exchange-traded funds are seeing some renewed interest. The largest bank loan ETF is the PowerShares Senior Loan Portfolio (NYSE: <a class="ticker" href="/stock/bkln#NYSE">BKLN</a>).
BKLN, which tracks the PowerShares Senior Loan Portfolio tracks the S&amp;P/LSTA U.S. Leverage Loan Index, is an alternative to traditional high-yield corporate bond funds and one that often receives attention when investors expect Treasury yields to rise.
&ldquo;Unlike fixed-rate instruments, the coupons of floating rate bank loans adjust upward as interest rates rise &ndash; providing investors with the potential of an attractive source of current income,&rdquo; <a href="https://www.invesco.com/portal/site/us/financial-professional/etfs/product-detail?productId=BKLN">according to PowerShares</a>. &ldquo;With their floating rate coupons and low durations, senior loans may offer compelling yield potential.&rdquo;
<h3>A Small, But Successful Niche</h3>
There are just four ETFs dedicated to senior loans, but each member of the quartet can be considered successful. BKLN is the king of the group with over $8.8 billion in assets under management. The smallest of the four bank loan ETFs is the Highland iBoxx Senior Loan ETF (NYSE: <a class="ticker" href="/stock/snln#NYSE">SNLN</a>), which has over $550 million in assets under management.
The other two senior loan ETFs are the actively managed SPDR Blackstone/GSO Senior Loan ETF (NYSE: <a class="ticker" href="/stock/srln#NYSE">SRLN</a>) and the First Trust Senior Loan Fund (NASDAQ: <a class="ticker" href="/stock/ftsl#NASDAQ">FTSL</a>). FTSL is also actively managed. That pair of senior loan funds have over $2.3 billion in combined assets under management.
Related Link: <a href="https://www.benzinga.com/trading-ideas/long-ideas/17/09/10042531/evaluating-low-volatility-etfs">Considering Low Vol ETFs</a>
&ldquo;SRLN and FTSL have reeled in $745 million and $523 million respectively year-to-date, and SNLN a much lesser $83 million during this time frame,&rdquo; said <a href="http://streetonefinancial.com/">Street One Financial</a> vice president Paul Weisbruch in a note out Tuesday.&nbsp;
<h3>It&#39;s About The Yield</h3>
Not surprisingly, investors are typically drawn to an ETF such as BKLN for yield. The PowerShares ETF has a 30-day SEC yield of almost 3.3 percent. However, some bond market observers currently advocate traditional junk bonds <a href="http://www.barrons.com/articles/sell-loan-etf-buy-junk-stratgiest-tchir-1505231631">over senior loans</a>.
&ldquo;Regardless, there is obviously investor appetite across the board for these funds and this segment in general, which basically has been the steady trend since these funds debuted several years back and there is likely opportunity for new entrants and perhaps new approaches here given the momentum,&rdquo; said Weisbruch.
Nearly 97 percent of BKLN&#39;s holdings have maturities of one to five years or five to 10 years. Ninety-four percent of the ETF&#39;s holdings are rated B, BB or BBB.
Related Link: <a href="https://www.benzinga.com/trading-ideas/long-ideas/17/09/10042516/a-hidden-gem-among-dividend-etfs">A Unique Dividend ETF&nbsp;</a>

FTSL

SNLN

SRLN

Renewed Enthusiasm For Bank Loan ETFs

U.S. interest rates are moving higher, but investors are still searching for income-generating assets. A popular avenue for income investors looking to cope with rising rates has been bank loans or senior loans &mdash; an asset class made increasingly accessible by exchange-traded funds such as the PowerShares Senior Loan Portfolio (NYSE: <a class="ticker" href="/stock/bkln#NYSE">BKLN</a>).
Floating rate notes and senior loans are unique in that their yield is tied to a benchmark such as LIBOR, rather than being fixed. Loans are also higher on the capital structure than other unsecured obligations, and some even carry floors to insure you earn a respectable yield even if rates stay low. Their coupon rate typically resets every 90 days, resulting in a duration shorter than three months, <a href="http://www.benzinga.com/etfs/specialty-etfs/14/05/4586380/uncertainty-on-the-rise-for-bank-loan-etfs">Benzinga reported</a>.
<h3>Investor Strategy</h3>
So, one way of looking at an ETF such as BKLN, which is passively managed and the largest of the senior loan ETFs in the United States, is that allows income to investors to have their cake and eat it, too. BKLN, which tracks the S&amp;P/LSTA U.S. Leveraged Loan 100 Index, reduces rate risk and has a 30-Day SEC yield of 2.72 percent. That is a nice level of income to get to lower rate risk.
Still, that does not mean BKLN and senior loans are free lunches.
&ldquo;While its interest-rate risk is low, its credit risk is high. Most of the fund&rsquo;s assets are invested in below-investment-grade loans,&rdquo; said <a href="http://news.morningstar.com/articlenet/article.aspx?id=799438">Morningstar</a> in a recent note. &ldquo;As of February 2017, the average default rate from 2002 to 2017 for high-yield loans was 3.3 percent, according to JPMorgan and S&amp;P. The minimum initial spread must be 125 basis points over Libor to be included in this fund. Thus, despite its short duration, the fund offered a yield of 2.7 percent in February 2017.&rdquo;
<h3>Addressing Familiar Concerns</h3>
A familiar critique of high-yield bond funds is that they could be vulnerable in liquidity events. While that notion has met with some well-founded opposition as it pertains to <a href="https://www.benzinga.com/analyst-ratings/analyst-color/17/02/9001666/warming-up-to-junk-bond-etfs-in-2017">traditional junk bond ETFs</a>, liquidity concerns linger for senior loans.
&ldquo;Senior loans&rsquo; illiquidity creates challenges for the fund. There is a liquidity mismatch because the fund must provide daily liquidity, while there is no set time limit to settle senior-loan trades. In fact, it took 17 days on average to complete a senior-loan trade during the second quarter of 2016, per Markit,&rdquo; said Morningstar. &ldquo;The fund employs various measures to address the liquidity risk. It allocates roughly 10 percent of its assets to cash and more-liquid high-yield bonds. The rest of the assets are skewed toward the most-liquid and largest loans. It also has a line of credit for emergency liquidity events.&rdquo;
Still, investors have added $4.8 billion to BKLN over the past year, more than double the inflows to the second-place PowerShares ETF.
Related Links:
<a href="https://www.benzinga.com/analyst-ratings/analyst-color/17/02/9103045/corporate-bond-etfs-remain-popular">Corporate Bond ETFs Remain Popular</a>
<a href="https://www.benzinga.com/trading-ideas/long-ideas/17/02/9024086/an-asset-class-for-rising-rates">An Asset Class For Rising Rates</a>

A Cautionary Tale On Bank Loan ETFs

Invesco Ltd. (NYSE: <a class="ticker" href="/stock/ivz#NYSE">IVZ</a>)'s PowerShares unit, the fourth-largest U.S. issuer of exchange-traded funds, introduced four multi-asset ETFs Thursday.
The PowerShares Conservative Multi-Asset Allocation Portfolio (BATS: PSMC), an actively managed ETF, looks to deliver total returns with lower risk while featuring diversity among asset classes.
<h3>Diversity And Asset Classes</h3>
PSMC&#39;s &ldquo;target allocation of total assets: 50 percent to 80 percent in fixed income ETFs, 20 percent to 50 percent in equity ETFs and 5 percent to 10 percent in underlying ETFs that invest in foreign stocks and bonds as well as American depositary receipts (ADRs) and global depositary receipts (GDRs),&rdquo; <a href="https://www.invesco.com/portal/site/us/financial-professional/etfs/product-detail?productId=PSMC">according to PowerShares</a>.
<h3>A Few Examples</h3>
PSMC currently features 10 other PowerShares as its holdings, including popular fare such as the PowerShares Senior Loan Portfolio (NYSE: <a class="ticker" href="/stock/bkln#NYSE">BKLN</a>) and the Powershares FTSE RAFI US 1000 Portfolio (NYSE: <a class="ticker" href="/stock/prf#NYSE">PRF</a>), among others.
The PowerShares Moderately Conservative Multi-Asset Allocation Portfolio (BATS: PSMM) uses a moderately conservative investment approach that includes a &ldquo;target allocation of total assets: 50 percent to 80 percent in fixed income ETFs, 20 percent to 50 percent in equity ETFs and 5 percent to 15 percent in underlying ETFs that invest in foreign stocks and bonds as well as American depositary receipts (ADRs) and global depositary receipts (GDRs),&rdquo; according to PowerShares.
PSMM, which is also actively managed, holds several of the same ETFs found in PSMC, including BKLN, PRF and the PowerShares Fundamental High Yield Corporate Bond Portfolio (NYSE: <a class="ticker" href="/stock/phb#NYSE">PHB</a>).
The PowerShares Balanced Multi-Asset Allocation Portfolio (BATS: PSMB) look to deliver income and the potential for capital appreciation.
PSMB&#39;s &ldquo;target allocation of total assets: 50 percent to 70 percent in equity ETFs, 30 percent to 50 percent in fixed income ETFs and 10 percent to 25 percent in underlying ETFs that invest in foreign stocks and bonds,&rdquo; according to PowerShares. The ETF is also actively managed.
Related Link: <a href="https://www.benzinga.com/trading-ideas/long-ideas/17/01/8968972/advisors-continue-allocating-assets-to-etfs">Advisors Continue Allocating Assets To ETFs</a>
Six of PSMB&#39;s 10 holdings currently are PowerShares equity ETFs, including PRF and the PowerShares S&amp;P 500 Low Volatility Portfolio (NYSE: <a class="ticker" href="/stock/splv#NYSE">SPLV</a>). PSMB is also actively managed.
The PowerShares Growth Multi-Asset Allocation Portfolio (BATS: PSMG) seeks long-term capital appreciation through diversification.
&ldquo;The Fund&#39;s target allocation of total assets: 60 percent to 80 percent in equity ETFs, 20 percent to 40 percent in fixed income ETFs and 20 percent to 30 percent in underlying ETFs that invest in foreign stocks and bonds,&rdquo; said PowerShares.
Seven of PSMG&#39;s top 10 holdings are equity funds, including PRF and SPLV. The actively managed ETF charges 0.39 percent per year.
All four of the new ETFs trade on Bats, bringing the total of ETFs trading there to nearly <a href="http://finance.yahoo.com/news/bats-welcomes-four-powershares-funds-152700540.html">160 from 27 issuers</a>.

New ETFs

PowerShares Fundamental High Yieldorate Bond Portfolio

PowerShares Exchange Traded Fund FTSE RAFI US 1000 Portfolio

PowerShares S&P 500 Low Volatility Portfolio

SPLV

PowerShares Launches 4 Multi-Asset ETFs

On <a href="http://video.cnbc.com/gallery/?video=3000564732">CNBC&#39;s Fast Money Final Trade</a>, Tim Seymour recommended PowerShares Senior Loan ETF (NYSE: <a class="ticker" href="/stock/bkln#NYSE">BKLN</a>) as a buy.

	Brian Kelly thinks that Market Vectors Gold Miners ETF (NYSE: <a class="ticker" href="/stock/gdx#NYSE">GDX</a>) should be bought.

	Dan Nathan thinks that <a href="http://www.investopedia.com/features/industryhandbook/retail.asp?ad=dirN&amp;qo=relatedSearchNarrow&amp;qsrc=6&amp;o=40186">the retail sector</a> is struggling. He wants to sell SPDR S&amp;P Retail (ETF) (NYSE: <a class="ticker" href="/stock/xrt#NYSE">XRT</a>).

	Guy Adami would buy QUALCOMM, Inc. (NASDAQ: <a class="ticker" href="/stock/qcom#NASDAQ">QCOM</a>) if it can hold $65. <a href="http://www.benzinga.com/news/earnings/16/11/8640652/qualcomm-tickers-higher-on-top-bottom-line-beat">QUALCOMM</a> reported earnings on Wednesday.

CNBC

Fast Money

Media

Market Vectors ETF Trust Market Vectors Gold Miners

QCOM

Gold Miners, Retail And Qualcomm: Fast Money Picks For November 3

Among the exchange-traded funds benefiting from investors&#39; thirst for yield and fixed income are bank loan funds, including the PowerShares Exchange-Traded Fund Trust II (NYSE: <a class="ticker" href="/stock/bkln#NYSE">BKLN</a>) and the actively managed SSGA Actice ETF Trust (NYSE: <a class="ticker" href="/stock/srln#NYSE">SRLN</a>).
Floating rate notes and senior loans are unique in that their yield is tied to a benchmark such as LIBOR, rather than being fixed. Loans are also higher on the capital structure than other unsecured obligations, and some even carry floors to insure you earn a respectable yield even if rates stay low. Their coupon rate typically resets every 90 days, resulting in a duration shorter than three months, <a href="http://www.benzinga.com/etfs/specialty-etfs/14/05/4586380/uncertainty-on-the-rise-for-bank-loan-etfs">Benzinga reported last year</a>.
<bzrelatedlink>Related Link: <a href="http://www.benzinga.com/trading-ideas/long-ideas/16/07/8180329/an-aristocratic-etf-for-dividend-growth-investors">An Aristocratic ETF For Dividend Growth Investors</a></bzrelatedlink>
Bank or senior loans were viewed as vulnerable to hawkish changes in Federal Reserve monetary policy, a scenario that plagued BKLN and SRLN. However, the Fed has yet to raise rates this year, helping investors renew their affinity for high-yielding assets such as senior loan ETFs.
<h3>Recent Performance</h3>
That renewed affinity was on display in significant fashion during the second quarter.
&ldquo;Following on from an impressive March, ETFs tracking US leveraged loans saw their best quarterly inflow in two years. According to Markit&rsquo;s ETP analytics service, ETFs tracking leveraged loans indices saw $614 million of inflows in Q2, the highest since Q1 2014 when over $1 billion was poured into the asset class. Leveraged loans ETFs now have $6.3 billion of AUM,&rdquo; said <a href="http://www.markit.com/Commentary/Get/01072016-Credit-Loan-ETFs-see-best-quarterly-inflow-in-two-years">Markit</a> in a recent note. 
During the second quarter, BKLN, the largest leveraged loan ETF, added nearly $513 million in new assets, <a href="https://www.invesco.com/portal/site/us/financial-professional/etfs/tools/flow-trend-tracker">according to PowerShares data</a>. Only two other PowerShares saw larger inflows during the second quarter.
BKLN follows the S&amp;P/LSTA U.S. Leveraged Loan 100 Index. In the event of issuer default, senior loans reside higher on the claims totem pole than traditional corporate bonds or preferred stock, meaning holders of these bonds have higher claims probability if the issuer goes bankrupt.
&ldquo;It&rsquo;s been quite a turnaround for the leveraged loans this year. The Markit iBoxx USD Liquid Leveraged Loans Index had experienced four consecutive months of negative returns (November 2015 through to February 2016), before rallying in relief in the following three months. At one point in February, leveraged loans were down nearly 2 percent on a total return basis, but have since erased those losses to end the first half of this year up 4.48 percent,&rdquo; added Markit.
BKLN and SRLN are up an average of 4 percent this year, while being significantly less volatile than standard high-yield corporate bond ETFs.

Bank Loan ETFs Enjoy Stellar Second Quarter

This year&#39;s flows action in the world of exchange-traded funds has largely been defined by risk-off sentiment. That includes advisors and investors flocking to fixed income ETFs.
At various points this year, six of the top 10 asset-gathering ETFs were bond funds. Although that number has dropped to four, that does not diminish investors&#39; thirst for bond ETFs. In fact, that desire was on display in May as bond ETFs <a href="http://www.benzinga.com/trading-ideas/long-ideas/16/05/7969910/low-fee-bond-etfs-are-where-its-at">kept packing on assets</a>.
<h3>Asset Gathering</h3>
&ldquo;Investors put an additional $4.2 billion of net new money into fixed income ETFs in May, pushing the year to date flows figure to $42 billion, according to Factset data. While demand remained strong for actively managed fixed income mutual funds this year, up until last week, a wide variety of lower-cost ETFs that offer intra-day liquidity and typically seek to passively replicate an index have been gaining share in 2016,&rdquo; said <a href="http://trymsatoday.com/">S&amp;P Capital IQ</a> in a note out Monday. 
<bzrelatedlink>Related Link: <a href="http://www.benzinga.com/analyst-ratings/analyst-color/16/06/8076757/its-getting-pricey-to-chase-yield">It's Getting Pricey To Chase Yield</a></bzrelatedlink>
The iShares Core U.S. Aggregate Bond Fund (NYSE: <a class="ticker" href="/stock/agg#NYSE">AGG</a>) is this year&#39;s top asset-gathering bond ETF and only the SPDR Gold Trust (ETF) (NYSE: <a class="ticker" href="/stock/gld#NYSE">GLD</a>) has added more new assets year-to-date than AGG. Making AGG&#39;s haul all the more impressive is the fact that has added more than double the new money as its primary rival, the Vanguard Total Bond Market ETF (NYSE: <a class="ticker" href="/stock/bnd#NYSE">BND</a>). However, BND is still among the top 10 asset-gathering ETFs. 
<h3>Bond ETF Flows And Yield Hunting</h3>
Bond ETF flows also highlight investors&#39; appetite for yield, and that hunt for yield is helping ETFs holding preferred stocks and senior loans <a href="http://www.benzinga.com/trading-ideas/long-ideas/16/05/8033498/sizing-up-senior-loan-etfs">added new assets </a>this year.
&ldquo;Another popular ETF in May was the PowerShares Senior Loan Portfolio (PowerShares Exchange-Traded Fund Trust II (NYSE: <a class="ticker" href="/stock/bkln#NYSE">BKLN</a>)), which invests in the 100 largest bank loans with floating rate coupons. BKLN gathered $510.1 million of new assets in May, erasing the outflows the ETF suffered through the first four months of 2016. Unlike fixed-rate ETFs, coupons of BKLN&#39;s holdings adjust higher as interest rates rise,&rdquo; said S&amp;P Capital IQ.
Floating rate notes and senior loans are unique in that their yield is tied to a benchmark such as LIBOR, rather than being fixed. Loans are also higher on the capital structure than other unsecured obligations, and some even carry floors to insure you earn a respectable yield even if rates stay low. Their coupon rate typically resets every 90 days, resulting in a duration shorter than three months, <a href="http://www.benzinga.com/etfs/specialty-etfs/14/05/4586380/uncertainty-on-the-rise-for-bank-loan-etfs">Benzinga previously reported</a>.
&quot;Meanwhile, iShares US Preferred Stock ETF (iShares S&amp;P US Pref Stock Idx Fnd (ETF) (NYSE: <a class="ticker" href="/stock/pff#NYSE">PFF</a>)) pulled in $436.9 million of new money last month. The ETF holds approximately 300 securities that combine bond characteristics, such as a fixed stream of income and are senior to common stocks, with common stock characteristics, such as ownership in the company and trading on an exchange. PFF, which has a 0.47 percent expense ratio, sports a 5.8 percent 30-day SEC yield,&rdquo; added S&amp;P Capital IQ.

iShares S&P US Preferred Stock Index Fund

Guess What? Investors Still Love Bond ETFs

With bond markets pricing in an interest rate hike from the Federal Reserve next month, there could be some near-term headwinds for higher-yielding corners of the fixed income space, including senior loans.
<h3>Senior Loans</h3>
Floating rate notes and senior loans are unique in that their yield is tied to a benchmark such as LIBOR, rather than being fixed. Loans are also higher on the capital structure than other unsecured obligations, and some even carry floors to insure you earn a respectable yield even if rates stay low. Their coupon rate typically resets every 90 days, resulting in a duration shorter than three months, <a href="http://www.benzinga.com/etfs/specialty-etfs/14/05/4586380/uncertainty-on-the-rise-for-bank-loan-etfs">Benzinga previously reported</a>.
Related Link: <a href="http://www.benzinga.com/trading-ideas/long-ideas/16/05/7992647/betting-on-bank-loans-again">Betting On Bank Loans Again</a>
<h3>Senior Loan ETFs</h3>
Senior loan exchange-traded funds, such as the SPDR Blackstone/GSO Senior Loan ETF (SSGA Actice ETF Trust (NYSE: <a class="ticker" href="/stock/srln#NYSE">SRLN</a>)) and the PowerShares Senior Loan Portfolio (PowerShares Exchange-Traded Fund Trust II (NYSE: <a class="ticker" href="/stock/bkln#NYSE">BKLN</a>)), feature tempting yields because these funds must entice investors for the elevated risk relative to, say, U.S. government or municipal bond ETFs. For example, BKLN, the largest senior loan ETF, has a 30-day SEC yield of 6.15 percent.
Due to their rate reset feature, BKLN, SRLN and rival funds tracking this asset class should not necessarily be babies thrown out with the rate hike bathwater. Credit quality, at least in theory, should be the concern, but on that senior loans and the relevant ETFs have advantages.
&ldquo;Senior loans sound like a good deal. They have historically had lower credit losses than high-yield bonds, less interest-rate risk than intermediate-term, fixed-rate bonds, and higher yields than many other short-duration instruments. But it is important to bear in mind that these high yields are compensation for risk,&rdquo; according to <a href="http://news.morningstar.com/articlenet/article.aspx?id=755025&amp;SR=Yahoo&amp;yptr=yahoo">Morningstar</a>.
<h3>Concern: Liquidity</h3>
Arguably the most prominent concern with senior loans is liquidity, a familiar refrain from critics of high-yield corporate bond ETFs. A common theory is that junk bonds are not the largest slice of the overall bond market, so in times of elevated market stress, there can be some liquidity crimping, though<a href="http://www.benzinga.com/trading-ideas/long-ideas/16/05/7942103/yes-this-junk-bond-etf-is-sufficiently-liquid"> ETFs have proven to be nimble</a> at adapting to trying market environments.
<bzrelatedlink>Related Link: <a href="http://www.benzinga.com/general/biotech/16/05/7977044/blackrock-adds-to-smart-beta-lineup-with-9-sector-etfs">BlackRock Adds To Smart Beta Lineup With 9 Sector ETFs</a></bzrelatedlink>
The logic applied from there would be that senior loans are a smaller part of the high-yield space so if everyone heads for the exits at one time, there could be problems.
&ldquo;Senior loan originators can sell their portion of the loan to other investors on the secondary market. Unlike traditional bonds, these loans do not settle on a T+3 schedule (three days after the transaction date). In fact, there is no maximum settlement period for these loans, though the median settlement period in the first three quarters of 2015 was 12 days according to the LSTA. That can pose a challenge to funds that provide daily liquidity such as mutual funds and exchange-traded funds,&rdquo; added Morningstar.

Sizing Up Senior Loan ETFs

Investors continue hunting for yield, and with the Federal Reserve pausing on hiking interest rates to this point in 2016, some previously beloved high-yield asset classes that came under pressure amid last year&#39;s rate hike speculation are again being embraced.
<h3>Floating Rate Notes, Senior Loans</h3>
That includes senior loans and the PowerShares Senior Loan Portfolio (PowerShares Exchange-Traded Fund Trust II (NYSE: <a class="ticker" href="/stock/bkln#NYSE">BKLN</a>)). BKLN, which turned five in March, was the first exchange-traded fund to make senior loans, an asset previously reserved exclusively for institutional investors, accessible to the wider audience.
Floating rate notes and senior loans are unique in that their yield is tied to a benchmark such as LIBOR, rather than being fixed. Loans are also higher on the capital structure than other unsecured obligations, and some even carry floors to insure you earn a respectable yield even if rates stay low. Their coupon rate typically resets every 90 days, resulting in a duration shorter than three months, <a href="http://www.benzinga.com/etfs/specialty-etfs/14/05/4586380/uncertainty-on-the-rise-for-bank-loan-etfs">Benzinga reported last year</a>.
<bzrelatedlink>Related Link: <a href="http://www.benzinga.com/general/biotech/16/05/7977044/blackrock-adds-to-smart-beta-lineup-with-9-sector-etfs">BlackRock Adds To Smart Beta Lineup With 9 Sector ETFs</a></bzrelatedlink>
<h3>In Defense Of BKLN</h3>
Part of the reason advisors and investors have recently eschewed BKLN is because the ETF easily qualifies as a high-yield offering. A 30-day SEC of over 6.2 percent confirms as much as does a lineup that devotes 91 percent of its combined weight to bonds rated BB, B or CCC. Fortunately, BKLN&#39;s allocation to CCC-rated bonds,<a href="http://www.benzinga.com/trading-ideas/long-ideas/15/11/5996195/going-high-class-with-a-junk-bond-etf"> one of the worst-performing</a> corners of the junk bond market last year, is just 6 percent.
&ldquo;Investors in senior bank loans expect to see competitive yields in exchange for investing in debt with lower credit ratings. However, bank loans generally have minimal exposure to the volatile energy sector. Energy accounted for 1.4 percent of the S&amp;P/LSTA U.S. Leveraged Loan 100 Index as of April 30, 2016, and energy sector defaults are expected to climb as high as 20 percent in 2016,&rdquo; said PowerShares<a href="http://www.blog.invesco.us.com/case-for-senior-bank-loans-search-for-yield"> in a note</a> out Monday.
BKLN follows the S&amp;P/LSTA U.S. Leveraged Loan 100 Index. In the event of issuer default, senior loans reside higher on the claims totem pole than traditional corporate bonds or preferred stock, meaning holders of these bonds have higher claims probability if the issuer goes bankrupt.
&ldquo;Even in the event of a default, however, holders of senior bank loans have first claim on an issuer&rsquo;s assets, owing to the loans&rsquo; &lsquo;senior&rsquo; lien status in a company&rsquo;s capital structure. According to Moody&rsquo;s Investors Service, senior loan recovery rates have historically hovered around 80 percent &mdash; compared with 28 percent for the Barclays U.S. Corporate High Yield Index &mdash; which can help investors get more of their investment back in the event of a default. That can have a positive effect on a loan or bond&rsquo;s total return,&rdquo; added PowerShares.
Over 95 percent of BKLN&#39;s holdings have maturities of one to five years or five to 10 years. The $4.3 billion ETF currently holds 111 senior loans from issuers in the consumer discretionary, technology and utilities sectors, among others.

Dividends

Betting On Bank Loans Again

A full month has now passed since the Federal Reserve hiked interest rates for the first time since 2006. This development created a far different environment than many investors anticipated. In fact, many of the funds that were considered at the top of a rate hike &ldquo;play book&rdquo; need to be reconsidered in light of current market trends.

	Let&rsquo;s examine some of the foremost rate hike plays that have been touted since the taper tantrum of 2013.

	ProShares Short 20+ Year Treasury Bond ETF (NYSEARCA:TBF)

	Most investors automatically associate rising interest rates with falling Treasury bond prices. Therefore, a fund like TBF, which shorts a basket of long-term Treasuries, should be a no brainer as the Fed tightens monetary policy.

	Nevertheless, over the last month TBF has fallen 3.85% and continues to be mired in a pervasive downtrend. This ETF is below its long-term moving average and looks ready to test its 52-week lows in the near future as well.

	What many underestimated in this trade is the volatility in stocks driving a traditional &ldquo;flight to quality&rdquo; in long-term Treasuries. In addition, the actual mechanics of an interest rate hike are all centered around the short end of the yield curve. <a href="http://fmdcapital.com/what-you-need-to-know-about-rising-rate-etfs/">This has little effect on the price of long duration bonds</a>, which are driven by conventional market forces of buyers and sellers.

	PowerShares Exchange-Traded Fund Trust II&nbsp;(NYSEARCA:BKLN)

	Remember when senior loans and floating rate notes were going to be the cure to your rising rate woes? That thesis was predicated on the notion that these debt instruments were insulated from interest rate risk because of their adjustable duration component. This makes their effective duration very short as it floats in relation to a benchmark such as LIBOR.

	However, the little-talked about risk in these securities is a contracting credit environment. A fund such as BKLN is sensitive to credit headwinds similarly to the iShares High Yield Corporate Bond ETF (HYG).
This ETF peaked near the middle of 2015 and has been in a steady decline lower ever since. On a net basis, BKLN is virtually flat since the Fed rate hike and continues to show a high correlation to credit sensitive junk bonds.

	Despite the short-term woes, BKLN may ultimately regain its footing if the stock market can turn the corner or regain some form of stability. In addition, it offers a current 30-day SEC yield of 7.03%, which will be <a href="http://fmdcapital.com/why-i-will-likely-be-a-buyer-of-high-yield-in-2016/">attractive for aggressive income investors looking to capitalize on distressed prices.</a>

	ProShares Investment Grade Interest Rate Hedged (BATS:IGHG)

	IGHG is a unique corporate bond fund designed to hold long positions in a basket of investment grade stocks alongside short positions in U.S. Treasury bonds. The goal is to &ldquo;hedge&rdquo; the interest rate risk that is typically associated with a group of high quality bonds at a reasonable expense ratio of 0.30%.

	IGHG has fallen prey to relatively weak demand in investment grade corporate bonds combined with falling interest rates on the longer end of the yield curve. This ETF has dropped 2.09% over the last month and continues to demonstrate a lack of market fear in the rising rate thesis.

	The IGHG strategy is designed to collect the income from the underlying bonds without suffering significant capital depreciation as intermediate-term Treasury yields rise. This isn&rsquo;t a reality in the current fixed-income environment, but may become a more sought after tool when rates eventually reverse course.

	The Bottom Line

	Many of the funds on this list are sound vehicles that are designed to perform with specific fundamental characteristics or in a contrarian environment. Their lack of participation in the short time since the Fed rate hike doesn&rsquo;t mean that they won&rsquo;t offer measurable value at some point in the future. Investors considering these tools to enhance their portfolio should be mindful of what factors may contribute to a turn in the current trend or continue to drag them lower.

	Furthermore, these examples highlight the difference between theory and practice when considering how investments will react in the aftermath of a specific market event. Just because something &ldquo;should&rdquo; work doesn&rsquo;t mean that it is guaranteed to do so. Make sure to wait for price to confirm your thesis before<a href="http://fmdcapital.com/3-income-funds-you-should-hold-in-2016/"> committing to a new direction with your bond allocations.</a>

	Searching for income? Download our latest special report on dividend paying ETFs: <a href="http://fmdcapital.com/investor-insights/special-reports/">The Ultimate ETF Income Guide.</a>

	This was originally shared on <a href="http://fmdcapital.com/">FMD Capital Management</a>

IGHG

3 Bond ETFs That Didn't Get The Rate Hike Boost Many Expected

Though there have been bumps along the way, when the PowerShares Senior Loan Portfolio (NYSE: <a class="ticker" href="/stock/bkln#NYSE">BKLN</a>) debuted in early 2011 it spent significant time as a compelling option for fixed income investors looking to access respectable, even high, yields in a low interest rate environment.

	That popularity made the PowerShares Senior Loan Portfolio the largest exchange traded fund tracking senior loans, also known as bank loans, in addition to being the first ETF to offer investors exposure to the asset class. With advisors and investors reconfiguring their expectations for changes in Federal Reserve interest rate policy, BKLN has been repudiated, but there are reasons to believe recent treatment of the ETF has been far too harsh. In fact, some data suggest this is an ETF that should not be ignored even interest rates do rise.

	Floating rate notes and senior loans are unique in that their yield is tied to a benchmark such as LIBOR, rather than being fixed. Loans are also higher on the capital structure than other unsecured obligations, and some even carry floors to insure you earn a respectable yield even if rates stay low. Their coupon rate typically resets every 90 days, resulting in a duration shorter than three months, <a href="http://www.benzinga.com/etfs/specialty-etfs/14/05/4586380/uncertainty-on-the-rise-for-bank-loan-etfs">Benzinga reported earlier this year</a>.

	Part of the reason advisors and investors have recently eschewed BKLN is because the ETF easily qualifies as a high-yield offering. A 30-day SEC of over 6 percent confirms as much as does a lineup that devotes 91 percent of its combined weight to bonds rated BB, B or CCC. Fortunately, BKLN&#39;s allocation to CCC-rated bonds,<a href="http://www.benzinga.com/trading-ideas/long-ideas/15/11/5996195/going-high-class-with-a-junk-bond-etf"> one of the worst-performing</a> corners of the junk bond market this year, is just 4 percent.

	BKLN holds the &ldquo;100 largest bank loans with floating rate coupons. Unlike fixed-rate instruments, the coupons of floating rate bank loans adjust upward as interest rates rise &ndash; providing investors with the potential of an attractive source of current income,&rdquo; <a href="https://www.invesco.com/portal/site/us/financial-professional/etfs/product-detail?productId=BKLN&amp;title=powershares-senior-loan-portfolio">according to PowerShares</a>.

	The ETF has suffered nearly $1.5 billion in outflows this year, a total exceeded by just one other PowerShares ETF. So it would appear that BKLN is a contrarian fixed income idea. Not only that, but the timing for considering this ETF could be good because senior loans are not as rate-sensitive as some investors perceive the asset class to be.

	&ldquo;Senior loans, also known as bank loans, are generally structured with floating rate coupons based on a spread over 90-day Libor. As such, interest rate risk tends to be measured by the number of days until the next rate reset, rather than the more traditional measure of duration used for fixed rate investments. Investors who are looking for exposure to high yield bonds, but are concerned about rates might prefer senior loans &mdash; most senior loans are to issuers rated below investment grade, yet these instruments have very low interest rate exposure,&rdquo; said PowerShares <a href="http://www.blog.invesco.us.com/embracing-rising-interest-rates">in a note out today</a>.

Intraday Update

Investors Shouldn't Be Ditching This Bond ETF

In a new report for LCD, Chief Investment Officer of Lehmann Livian Fridson Advisors Marty Fridson discusses the dangers presented by high-yield ETFs. The topic was the subject of a recent contentious debate between BlackRock CEO Laurence Fink and activist investor Carl Icahn at the Delivering Alpha Conference.
<h3>
	Icahn&rsquo;s Claim</h3>

	According to Icahn, high-yield ETFs are dangerous for the market. The instruments have become extremely popular investments, but Icahn contends that the underlying holdings are extremely risky and illiquid. Icahn fails to see who would buy those securities in the event of a large-scale, panicked market sell-off.

	<img alt="" src="/files/u81483/unnamed3.jpg" style="font-size: 13px; line-height: 20px; width: 420px; height: 286px;" />
<h3>
	ETFs Isolated?</h3>

	The other side of the argument, represented by Fink, is that ETF buyers trade among themselves and that ETF trading has no effect on the underlying securities. Fink, whose firm sells bond ETFs, believes that the ETFs create extra liquidity in the market, which benefits bond investors.
<h3>
	Fridson&rsquo;s take</h3>

	In his report, Fridson explains that bear markets can be particularly ugly for high yield ETFs such as SPDR Barclays High Yield Bond ETF (NYSE: <a class="ticker" href="/stock/jnk#NYSE">JNK</a>), iShares iBoxx $ High Yield Corporate Bd ETF (NYSE: <a class="ticker" href="/stock/hyg#NYSE">HYG</a>) and PowerShares Senior Loan ETF (NYSE: <a class="ticker" href="/stock/bkln#NYSE">BKLN</a>). However, Fridson believes that the contention that there is currently a bubble in the high-yield ETF market that has created an unprecedented risk level for investors is inaccurate.

	&ldquo;We can be confident that the next high-yield sell-off will feature illiquidity and horrific price gaps, but we have no assurances that the landscape will look uglier than in previous cycles,&rdquo; Fridson explained. &ldquo;Are the investment implications of, say, 15% of all high-yield issues falling by at least 20% in a single month any different from 11% declining by that magnitude, as in June 2002?&rdquo;

	<img alt="" src="/files/u81483/unnamed1.jpg" style="width: 420px; height: 286px;" />

	Although a harsh downturn in the high-yield market is inevitable at some point in the future, Fridson doesn&rsquo;t see anything particularly unique about the current cycle that would warrant a different investment approach than was advisable during past cycles.

Why The Next High-Yield Crash 'Will Be Ugly'

The leading developer of liquid alternative investment products, <a href="http://www.indexiq.com">IndexIQ</a>, launched two new ETFs Tuesday. The IQ Hedge Long/Short Tracker ETF (NYSE: QLS) and the IQ Hedge Event-Driven Tracker ETF (NYSE: QED), are the fifth and sixth additions to IndexIQ&#39;s hedge fund replication product portfolio.
<h3>
	Hedge Fund Replication Product Portfolio</h3>

	With the addition of the two new ETFs, IndexIQ has covered the four major hedge fund categories (equity hedge or long/short, event-driven, market neutral and global macro).

	The new ETFs aim to provide investment results similar to that of a hedge fund; however, they offer high liquidity. This is a luxury that is not usually afforded in the alternative investment world, as investors&#39; money is typically locked up for a period of time.

	<bzrelatedlink>Related Link: <a href="http://www.benzinga.com/etfs/specialty-etfs/15/03/5333884/2-new-super-dividend-etfs">2 New Super-Dividend ETFs</a></bzrelatedlink>

	Both ETFs use a series of short and long positions to take a position on one side, while hedging on the other side to hedge in the event of a market move in an unexpected direction. The new ETFs, along with IndexIQ&#39;s existing products, allow investors to create a hedge fund style portfolio with lower costs and more liquid ETFs.
<h3>
	IQ Hedge Long/Short Tracker ETF</h3>

	QLS is made up of 18 long and 21 short ETFs, for a total of 39 positions. The ETF seeks to provide performance similar to a long/short hedge fund with low correlation to the equity market.

	The top individual holdings include:
<ul>
<li>
		PowerShares Exchange-Traded Fund Trust II (NYSE: <a class="ticker" href="/stock/bkln#NYSE">BKLN</a>) with a 29.7 percent holding</li>
<li>
		iShares IBoxx $ Invest Grade Corp Bd Fd (NYSE: <a class="ticker" href="/stock/lqd#NYSE">LQD</a>) making up 12.9 percent of the ETF</li>
<li>
		iShares Russell 2000 Growth Index (ETF) (NYSE: <a class="ticker" href="/stock/iwo#NYSE">IWO</a>) coming in at 10.9 percent</li>
</ul>

	The largest short position is the iShares MSCI Emerging Markets Indx (ETF) (NYSE: <a class="ticker" href="/stock/eem#NYSE">EEM</a>) at 9.8 percent allocation.

	QLS began trading Tuesday at $20 and has an expense ratio of 1.10 percent.
<h3>
	IQ Hedge Event-Driven Tracker ETF</h3>

	QED is made up of 20 ETFs with nine long positions and 11 short positions. The ETF seeks to provide investment results similar to hedge funds that use an event-driven strategy.

	The top individual holding include:
<ul>
<li>
		SPDR Barclays Convertible SecETF (NYSE: <a class="ticker" href="/stock/cwb#NYSE">CWB</a>) making up 42 percent of the ETF</li>
<li>
		Vanguard Total Bond Market ETF (NYSE: <a class="ticker" href="/stock/bnd#NYSE">BND</a>) at 21.4 percent</li>
<li>
		iShares Barclays Aggregate Bond Fund (NYSE: <a class="ticker" href="/stock/agg#NYSE">AGG</a>) totaling 19.8 percent</li>
</ul>

	The largest short position is the iShares S&amp;P 500 Growth Index (ETF) (NYSE: <a class="ticker" href="/stock/ivw#NYSE">IVW</a>) with a 7.6 percent holding.

	The new ETF began trading Tuesday at $20 and has an expense ratio of 1.00 percent.

Short Ideas

Spdr Barclays Capital Convertible Securities Etf

2 New ETFs Going After Hedge Funds

Bank loan ETFs gained a great deal of notoriety and assets last year as investors flocked to these non-traditional debt securities in order to insulate their portfolio from rising interest rates. 

	Floating rate notes and senior loans are unique in that their yield is tied to a benchmark such as LIBOR, rather than being fixed.  

	Loans are also higher on the capital structure than other unsecured obligations, and some even carry floors to insure you earn a respectable yield even if rates stay low.  Their coupon rate typically resets every 90-days, resulting in a duration shorter than three months.

	The PowerShares Senior Loan Portfolio (NYSE: <a class="ticker" href="/stock/bkln#NYSE">BKLN</a>) gained nearly $5 billion in new inflows in 2013 as investors worried over the Fed’s long-term exit strategy from quantitative easing. 

	That demand initially carried forward into 2014 as well, but we are starting to see some recent outflows that may spark additional questions for ETF investors.  

	See also: <a href="http://www.benzinga.com/etfs/sector-etfs/14/05/4579252/transport-etfs-keep-on-trucking-higher">Transport ETFs Keep On Trucking Higher</a>

	According to ETF.com, BKLN has seen net redemptions of $74.5 million in May.  This marks the second straight month of coordinated outflows as long-term interest rates have continued to fall and traditional fixed-income securities become more attractive.

	One concern for ETF investors in this space is the liquidity of the underlying securities in the event that additional selling picks up.  Bank loans are notorious for their illiquid markets that often lead to long settlement times and unconventional trading practices.  

	In addition, income seekers must keep in mind that you are sidestepping interest rate risk in favor of credit risk with bank loans because most are rated below investment grade. 

	A flight from credit sensitive investments to quality holdings may also result in a shakeup of this sector.  

	Other notable ETFs in this space that may be affected include the SPDR Blackstone GSO Senior Loan Portfolio (NYSE: <a class="ticker" href="/stock/srln#NYSE">SRLN</a>) and First Trust Senior Loan Fund (NASDAQ: <a class="ticker" href="/stock/ftsl#NASDAQ">FTSL</a>).  

	While it’s important to understand these risks, each of these ETFs has also continued to provide <a href="http://www.benzinga.com/etfs/broad-u-s-equity-etfs/14/05/4571098/dissecting-dividend-growth-etfs">steady income and stable price action</a> in relation to the senior loan market.

Uncertainty On The Rise For Bank Loan ETFs

The annual Oscar awards for the ETF industry were held last week and the big winner was a unique product from Invesco PowerShares.

	The associate editors of the Journal of Indexing chose the winner of several awards in the world of ETFs and indexing.

	The 2013 William F. Sharpe Award for ETF Product of the Year went to the PowerShares Senior Loan Portfolio ETF (NYSE: <a class="ticker" href="/stock/bkln#NYSE">BKLN</a>). This is the equivalent of winner best movie of the year at the Oscars. The ETF was the first floating-rate senior loan ETF in the market and is now the largest with over $6.2 billion in assets under management.

	The ETF was recognized as the ETF vehicle that has had the biggest impact on the industry over the last 12 months. The ETF tracks an index that invests in the largest institutional leverage loans based on market weighting, spreads, and interest payments. A monthly dividend payment that equates to a 30-day SEC yield of 4.14 percent make the ETF an attractive investment option for income investors.

	See also: <a href="http://www.benzinga.com/markets/bonds/13/12/4166655/fed-tapers-etfs-on-the-move-spy-gld-tlt-uup#">Fed Tapers, ETFs On The Move (SPY, GLD, TLT, UUP)</a>

	Because the ETF invests in floating rate loans, a rise in interest rates will not have the same negative affect as they will on government and corporate bonds. That being said, 2013 was not a great year for BKLN based on performance versus the equities market. The ETF is currently down 0.7 percent, not including the dividends. When compared to other fixed income products, BKLN does stand out as one of the few ETFs not to suffer big losses this year.

	The other big winner for Invesco was the PowerShares S&amp;P 500 Hedged Portfolio ETF (NYSE: <a class="ticker" href="/stock/phdg#NYSE">PHDG</a>). The ETF is an actively managed fund that attempts to achieve positive returns in both bull and bear markets without tracking the overall stock or fixed income market. The strategy to achieve such returns includes investments in equities with an implied volatility hedge and dynamically allocating between equity, volatility, and cash.

	The ETF has achieved its goal of a positive return with a gain of 10.5 percent in 2013. The only issue is that it is less than half the return of the S&amp;P 500. Over time, PHDG should outperform the market if it can achieve its goal, but the ETF will underperform during strong bull markets. The expense ratio is a reasonable 0.39 percent and the 30-day SEC yield is 1.38 percent.

PHDG

ETF Award Winners Announced (BKLN, PHDG)

Here is the ETF Professor's ETF Watch List for Thursday, September 26, 2013.

Give the iShares Silver Trust (NYSE: <a class="ticker" href="/stock/slv#NYSE">SLV</a>) a look.

The Direxion Daily Small Cap Bear 3X Shares (NYSE: <a class="ticker" href="/stock/tza#NYSE">TZA</a>) could be worth a trade.

The iShares Europe 350 (NYSE: <a class="ticker" href="/stock/iev#NYSE">IEV</a>) looks good.

Check in with the SPDR S&amp;P Dividend ETF (NYSE: <a class="ticker" href="/stock/sdy#NYSE">SDY</a>).

Emerging markets plays of the day: iShares MSCI Thailand ETF (NYSE: <a class="ticker" href="/stock/thd#NYSE">THD</a>), Direxion Daily Emerging Markets Bear 3X Shares (NYSE: <a class="ticker" href="/stock/edz#NYSE">EDZ</a>) and the iShares MSCI Malaysia ETF (NYSE: <a class="ticker" href="/stock/ewm#NYSE">EWM</a>).

Forex play of the day: ProShares UltraShort Yen (NYSE: <a class="ticker" href="/stock/ycs#NYSE">YCS</a>).

Bond play of the day: PowerShares Senior Loan Portfolio (NYSE: <a class="ticker" href="/stock/bkln#NYSE">BKLN</a>).

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