Because of the market’s volatility in recent weeks, investors are more skittish. One area where they haven’t lost interest is the corporate bond exchange traded fund (ETF) market, which has helped push corporations to record levels of cash.U.S. companies are holding more cash in the bank than at any point on record, thanks to renewed confidence in corporate bonds. Although companies have the cash needed to hire or expand, they are timid to spend it while there’s so much doubt about the economic recovery’s pace. [New International Corporate Bond ETFs.]
Having money to spend but not using it is coming at a price, says Justin Lahart for The Wall Street Journal. That cash is earning next to no interest, which in the long run will make it a challenge to generate the returns that shareholders expect. That means sooner than later, those corporations will have to let the cash go to work. [5 ETFs Where You Can Find Income.]
In the end, companies who are willing to part with their cash will help determine the strength of the economy’s recovery. That cash could generate jobs, which will in turn support consumer spending.
For more stories about corporate bonds, visit our bond ETF category.
- PowerShares High-Yield Corporate Bond (NYSEArca: PHB)
- Vanguard Short-Term Corporate Bond (NYSEArca: VCSH)
- SPDR Barclays Capital Short-Term Corporate Bond (NYSEArca: SCPB)
- iShares iBoxx $ Investment Grade Corp Bond ETF (NYSEArca: LQD)
- iShares iBoxx $ High Yield Corporate Bond (NYSEArca: HYG)
For full disclosure, Tom Lydon’s clients own shares of LQD.
Tisha Guerrero contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. 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.