ETFs tied to investment-grade corporate debt are breaking out to all-time highs as investors try to find a happy medium between yield and safety.
The iShares iBoxx $ Investment Grade Corporate Bond Fund (LQD) has “traded like a tech bubble stock (during the good times) over the past few weeks,” Bespoke Investment Group notes in a blog post Thursday.
“Investors have been scrambling for yield, and LQD is an attractive option because it’s a non-Treasury fixed income product that yields more than 4%. But is it attractive after going parabolic this month?” the firm wonders.
LQD holds $23.5 billion in assets and charges investors an expense ratio of 0.15%. It has a distribution yield of 4.07%, according to manager BlackRock.
The ETF’s peers in the investment-grade corporate bond sector are also enjoying sharp rallies. They include PIMCO Investment Grade Corporate Bond (CORP) and Vanguard Intermediate-Term Corporate Bond (VCIT).
“High-quality corporate bonds offer relatively safe income and typically yield more than Treasury bonds because of their credit risk,” investment researcher Morningstar says in a report on LQD.
iShares iBoxx $ Investment Grade Corporate Bond Fund
Full disclosure: Tom Lydon’s clients own LQD.