Boost Corporate Bonds’ Income Proposition with this ETF

Experienced fixed income investors know that corporate bonds, both the investment-grade and high-yield varieties, sport higher yields than Treasuries. That’s added compensation for more risk, though U.S. corporate bonds are far from the riskiest asset class around.

Income-hungry investors who want more yield than what’s available with traditional corporate bond ETFs or individual issues can take heart in knowing there’s at least one ETF that delivers those goods: The NEOS Enhanced Income Credit Select ETF (HYBI). Currently home to nearly $200 million in assets under management, HYBI spent about a decade as an open-end mutual fund before converting to the ETF wrapper in September 2024.

Like other NEOS ETFs, HYBI is a covered call fund, hence its enticing 30-day SEC yield of 6.02%. Advisor and investors should note that HYBI’s options exposure isn’t derived from corporate bonds, but rather from contracts linked to the S&P 500 Index.

Honing in on HYBI

Obviously, HYBI answers the income bell, but prospective investors also want to know what the outlook for corporate bonds is in 2026. This is particularly since the asset class performed admirably last year. While a sequel to that 2025 bullishness may not be in store, experts believe corporate bonds will be sturdy again this year.

“We expect stable credit fundamentals in 2026. Agency rating actions have continued with positive bias,” notes Breckenridge Capital Advisors. “Redit is supported by solid revenue growth and cost discipline, driving margin improvement and steady debt metrics. However, mergers and acquisitions (M&A) and capital expenditures (cap ex) are each rising notably and may strain credit metrics if debt funding is used prodigiously.”

HYBI employs a fund-of-funds approach, meaning it holds three corporate bond ETFs to deliver that exposure. A pair of those funds are high-yield products. That means more than 63% of the HYBI portfolio is directed to junk bonds.

Fortunately, default rates remain low, and the Federal Reserve is expected to continue lowering interest rates this year. That, coupled with expectations of improving economic activity, is a factor that could work in favor of the NEOS ETF.

“Our macro-outlook for 2026 is for moderate real economic growth. Growth has been driven by spending from high income households and a boost in productivity from AI related cap ex. The Breckinridge Investment Committee anticipates one additional rate cut in 2026, with the 10-year Treasury yield expected to trade between 4.0 percent and 4.5 percent,” according to Breckenridge Capital.

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