Junk Bond Funds – danger, Will Robinson, danger
I was rather taken aback when I discovered that Vanguard has closed their junk bond funds to new investors. The relevant stats are:
Vanguard High-Yield Corporate Fund Investor Shares (VWEHX)
Vanguard High-Yield Corporate Fund Admiral Shares (VWEAX)
yield = 6.51%
duration = 4.2 yrs
assets = $17.9 b
Yes, I know: many such ETFs are available, plus I have had my eyes on Pimco ETFs (BOND, HYS). Having been reminded in no uncertain terms about the huge inflow of money to junk bond instruments, I have become rather gun shy. There is the Vanguard Long-Term Corporate Bond ETF (VCLT), that yields 4.35%, but the duration is 13.9(!!!).
Your thoughts? Bubble?