High-Yield Bond ETFs Advance After Fed Raises Interest Rates

Yellen: Third Avenue Fund Was 'Unusual'

The two biggest junk-bond ETFs gained after the Federal Reserve announced its first interest-rate increase in almost a decade.

The risk premium on the Markit CDX North American High Yield Index, a credit-default swaps benchmark tied to the debt of 100 speculative-grade companies, dropped for a third day as policy makers set the new target range for the federal funds rate at 0.25 percent to 0.5 percent, up from zero to 0.25 percent.

The gains in the exchange-traded funds follow their worst week in at least four years, as high-yield debt plummeted after Third Avenue Management said on Dec. 9 it was blocking clients from pulling their money from a credit mutual fund.

BlackRock’s iShares iBoxx High Yield Corporate Bond ETF, the largest fund of its kind, rose 0.8 percent to $80.73 at 4 p.m. in New York. It fell 3.8 percent last week, the biggest the five-day drop since May 2010. SPDR Barclays High Yield Bond ETF added 0.9 percent to $34.10, after sliding 4 percent last week, the most since August 2011.

The risk premium on the Markit CDX North American High Yield Index dropped 2.2 percent to to 480.238 basis points after jumping 18 percent last week.

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