Warnings are piling up for high-yield bonds. The asset class could take a big hit if the Fed’s rate hikes push the U.S. economy into a recession, sparking rating downgrades and defaults. But that hasn’t stopped investors from piling into junk bond ETFs. In fact, of the nearly $11 billion that flooded into fixed-income ETFs over the past week, $1.6 billion flowed into the iShares iBoxx High Yield Corporate Bond ETF (HYG), the most of any fund, according to Bloomberg data. It’s difficult for investors to resist yields near the highest levels of the past decade according to CreditSights. Zachary Griffiths, a senior fixed-income strategist with CreditSights, said the following on Bloomberg Television, “Yields look too good to be short. The potential for returns in the 12% area makes high-yield an attractive place to be and we’re also more optimistic on the economic front, which is very important for our call.” With money flowing into high yield and other corporate credit, demand is falling for cash-like short-term bond ETFs. For example, more than $860 million flowed out of the iShares 0-3 Month Treasury Bond ETF (SGOV) in the past week, after $6.6 billion flowed into the fund last year.

Finsum:With yields on high-yield bonds near a ten-year high, it’s difficult for investors to resist junk bond ETFs, even with warnings piling up.