Group 1 - The WisdomTree U.S. High Yield Corporate Bond, Zero Duration Index provides exposure to U.S. high-yield corporate bonds while targeting zero interest-rate duration through a systematic short overlay in U.S. Treasuries and/or Treasury futures adjusted monthly [1] - The bond universe includes USD-denominated issues from publicly listed, U.S.-domiciled issuers rated below BBB–/Baa3, with a minimum maturity of 1 year and a minimum par outstanding of 500 million USD; distressed names rated C or below are excluded [1] - The selection process emphasizes fundamental screens focusing on positive free cash flow and removes the sector-relative bottom 5% by liquidity [1] Group 2 - The weighting of the bond basket tilts towards higher income using recovery-adjusted OAS scaled by estimated probability of default, with an issuer cap of 2% to limit concentration [1] - The bond basket is reconstituted and rebalanced semi-annually in May and November, while the hedge is refreshed on a monthly basis [1]

Core Viewpoint - The SPDR Bloomberg High Yield Bond ETF (JNK) offers a reliable income stream for retirees, with a current yield of approximately 6.5% and assets totaling $7.7 billion, despite its association with below-investment-grade corporate bonds [2][6]. Group 1: Income Generation - JNK generates income by tracking the Bloomberg High Yield Very Liquid Index, which includes hundreds of below-investment-grade corporate bonds that pay contractual interest, providing predictable monthly distributions to shareholders [3][6]. - The ETF has maintained consistent monthly payments, reflecting the stability derived from a diversified bond portfolio, which is crucial for retirees managing fixed income budgets [4]. Group 2: Distribution Safety - The creditworthiness of JNK's underlying borrowers has significantly improved, with credit spreads narrowing to 2.74% as of January 2026, indicating minimal default risk perceived by bond market participants [5][6]. - The tight credit spread environment is supported by strong corporate balance sheets, enhancing the sustainability of JNK's distributions [5]. Group 3: Performance Metrics - Over the past decade, JNK has delivered an annualized return of 8.8%, combining income and price appreciation [6]. - The distribution from JNK has increased as interest rates rose, allowing newer bonds in the portfolio to carry larger coupons, which translates to higher payments for shareholders [8].

Core Insights - The fixed income market is experiencing shifts due to recent interest rate cuts by the Federal Reserve, creating new opportunities for advisors and investors [1][2] - Experts anticipate a slowdown in U.S. growth, which historically benefits the bond market [2] - Advisors and investors need to refine their fixed income portfolios to capitalize on valuable opportunities, particularly in the high yield sector, which has shown strong performance recently [3] High Yield Bonds - The BNY Mellon High Yield ETF (BKHY) is positioned as a compelling option for investors seeking high yield exposure [4] - BKHY employs a proprietary credit model to construct a portfolio with a risk profile similar to the Bloomberg US Corporate High Yield Total Return Index, focusing on high-value opportunities while minimizing exposure to lower-quality bonds [5] - The fund's active management allows it to adapt to changing market conditions, which is advantageous in the high yield sector [6] Portfolio Strategy - BKHY's portfolio primarily consists of short- to medium-duration assets, which can benefit from ongoing rate cuts while being less vulnerable to long-term economic concerns [7] - As of November 24, 2025, BKHY has achieved a subsidized 30-day SEC yield of 6.98%, indicating strong performance in the current market environment [7]

Core Insights - The article emphasizes the importance of diversification in fixed income portfolios, particularly in the context of potential Federal Reserve rate cuts and leadership changes [1] - High yield bonds are highlighted as a key component for building a diversified fixed income portfolio, offering both sector diversification and significant income [1] Group 1: High Yield Bonds - High yield bonds are increasingly relied upon for diversification and income, especially in a low bond default environment [1] - Various ETFs provide different strategies for gaining exposure to high yield bonds, necessitating due diligence from advisors and investors [2] Group 2: BNY Mellon High Yield ETF (BKHY) - BKHY aims to blend income and capital appreciation through a systematic investment process focused on the Bloomberg US Corporate High Yield Total Return Index [3][4] - The fund employs a proprietary credit model to identify opportunities in fallen angels and undervalued bonds, while minimizing exposure to overvalued securities for better downside risk management [4] - As of July 31, 2025, nearly 90% of BKHY's portfolio consists of bonds rated B or BB, which are less likely to default compared to lower-rated junk bonds [4] - BKHY currently offers a competitive 30-day subsidized yield of 6.85% as of September 5, 2025, alongside its diversification benefits [4]