Investment-Grade Corporate Bond ETFs Rally to Record Highs

ETF Trends

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

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Full disclosure: Tom Lydon’s clients own LQD.

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