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Do Target Maturity Bond ETFs Deserve a Place in Your Portfolio?

Neena Mishra
  • (1:00) - What Should Investors Expect From Bonds In 2019?
  • (3:45) - What Is A Defined Maturity ETF?
  • (6:50) - How Could These Strategies Work For Investors?
  • (10:10) - Overview of Invesco’s Suite of Defined Maturity Bonds: BulletShares ETFs
  • (15:30) - Is It Time To Invest In Emerging Market ETFs?
  • (18:15) - Do Defined Maturity ETFs Protect From Rising Interest Rates?
  • (19:50) - Episode Roundup: Podcast@Zacks.com

In this episode of ETF Spotlight, I talk with Jason Bloom, Director of Global Macro ETF Strategy at Invesco, about defined maturity bond ETFs.

First off, we discuss the bond market. After raising rates steadily for about three years, the Fed is likely to be patient with monetary policy in 2019, given global growth worries and still low inflation.

A number of Fed officials have stated recently that there is no urgency to raise rates, even though the central bank has penciled in two rate increases this year.

How should bond investors be positioned for 2019?

Jason then explains the basics of defined maturity ETFs and how these are different from typical bond funds. While traditional bond ETFs usually sell bonds well before their final maturity dates and reinvest those proceeds into other bonds, defined maturity ETFs invest in a number of bonds with similar maturities and hold those bonds to maturity. Investors can then can either spend the proceeds or reinvest them.

By holding a bond to maturity, the investor is protected from the negative effect of rising interest rates. While some investors implement the laddering strategy using individual bonds, defined-maturity ETFs can help investors build bond ladders quickly and easily, and at a much lower cost.

We also discuss how these ETFs can be used to plan for future cash-flow needs, like purchasing a house, paying for college or funding retirement.

Invesco’s suite of target maturity ETFs includes investment grade bond products like the Invesco BulletShares 2022 Corporate Bond ETF BSCM and the Invesco BulletShares 2028 Corporate Bond ETF BSCS, high yield bond products like the Invesco BulletShares 2026 High Yield Corporate Bond ETF BSJQ, as well as emerging markets bond funds like the Invesco BulletShares 2022 USD Emerging Markets Debt ETF BSBE.

Rising signs of stress in credit markets have concerned many experts. The amount of debt rated in the lowest tier of investment grade has soared and the Fed has also warned about increasing risks. What do investors need to know?

Emerging market assets were beaten down last year but have rebounded nicely this year. Should investors consider investing in EM bond ETFs now in view of the change in Fed’s tone and attractive valuations?

Find out on the podcast.

Please visit invesco.com to learn more about these ETFs and other Invesco products.  Make sure to tune in for our next podcast and also subscribe. If you have any comments or questions, please email podcast@zacks.com

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