Net Net: Promoting innovation and managing change

Junk bond market betting big against Fed rate hike

Inside the mind of the Fed

Traders have been using junk to bet against the possibility that the Federal Reserve will raise interest rates anytime soon.

Exchange-traded funds that track high-yield bond indexes have been the beneficiaries of a cash surge in recent weeks as market participants figure the central bank probably won't raise rates in 2015, and it could be well into 2016 before anything happens.

In just the past week alone, three bond-related ETFs pulled in $2.4 billion. Two are focused on high-yield, or junk, bonds, according to, despite repeated warnings on Wall Street that the segment of the market is headed for the rocks.

The iShares iBoxx $ Investment Grade Corporate Bond, the iShares iBoxx $ High Yield Corporate Bond and the SPDR Barclays High Yield Bond have been hugely popular.

During October, the group has pulled in $6.6 billion, with the two junk funds attracting about $4.3 billion of the total.