Behind the scenes of the equity rally, corporate bonds of both type are enjoying a rally all their own, leading to a surge in related exchange traded funds (ETFs).

Thanks to a better-than-expected earnings season, investors are increasingly willing to accept some risk. The average “junk” rated company is not distressed anymore, meaning yields have fallen to less than 10% above the benchmark Treasury bond, say Annelena Lobb and Rob Copeland for The Wall Street Journal. Yields on higher-quality corporations are also sharply lower.

As yields fall, bond prices rise. What’s the case for corporate bonds now?

  • iShares iBoxx $ High Yield Corporate Bond (HYG): up 16.2% year-to-date

  • iShares iBoxx $ Investment Grade Corp. Bond (LQD): up 4.6% year-to-date

  • SPDR Barclays Capital High Yield Bond (JNK): up 22.7% year-to-date

For more stories about corporate bonds, visit our bond category.

For full disclosure, Tom Lydon’s clients own shares of LQD.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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