Non-financial investment grade corporate bond issuance reached $584 billion through May, soon to eclipse 2017’s $644 billion. Those seeking broad-based exposure to the space have been funnelling capital into bond ETFs. Whether LQD, CIU, VCIT or GIGB, allow Overbond’s ETF pricer and screener converge on the best ETF for you on the basis of relative cheapness.
Source: ETF Trends
It comes as no surprise that bonds were the toast of the town versus equities during the height of the pandemic sell-off as investors took flight to safety. A deluge of capital into investment-grade bonds, in particular, have already spurred issuance to meet demand, resulting in double that of last year’s issuance.
“The corporate bond bonanza continues in the U.S., as non-financial investment grade corporate bond issuance reached $584 billion through May, ratings agency Fitch said Tuesday,” an Axios.com report noted.
“That was more than double the amount registered over the same time frame in 2019 and is fast approaching the entire amount issued that year, which was the second-highest full-year issuance on record,” the report also said.
Much thanks have to also be given to the U.S. Federal Reserve, which decided to backstop a lot of corporate debt, high yield included, by purchasing bond exchange-traded funds (ETFs). Support from the federal government went a long way to shore up the bond market and there could be more room to run.
“If issuance continues at the same pace going forward, it will easily top the previous high of $644 billion in 2017,” Fitch said in a statement, per the Axios report.
For investors looking to get in on the corporate bond rally can look to investment grade options in exchange-traded funds (ETFs). ETFs in this category include the iShares Intermediate Credit Bond ETF (NASDAQ: CIU), iShares iBoxx $ Investment Grade Corp Bd ETF (NYSEArca: LQD) and Vanguard Interm-Term Corp Bd ETF (NASDAQ: VCIT).
Another option is the ProShares Investment Grade—Intr Rt Hdgd (BATS: IGHG). IGHG tracks the performance of the Citi Corporate Investment Grade (Treasury Rate-Hedged) Index so it invests in long positions in USD-denominated investment-grade corporate bonds issued by both U.S. and foreign domiciled companies and short positions in U.S. Treasuries.
Another ETF to consider is the Goldman Sachs Access Investment Grade Corporate Bond ETF (GIGB). GIGB seeks to provide investment results that closely correspond to the performance of the FTSE Goldman Sachs Investment Grade Corporate Bond Index.
The fund seeks to achieve its investment objective by investing at least 80% of its assets (exclusive of collateral held from securities lending) in securities included in its underlying index. The index is a rules-based index that is designed to measure the performance of investment grade, corporate bonds denominated in U.S. dollars that meet certain liquidity and fundamental screening criteria.
