Invesco also projected a record-breaking amount of supply to hit the market between Labor Day and the Fed’s September 17 policy announcement, anticipating about $80 billion in investment-grade offerings to hit the market. The sudden influx of supply could weigh on market in the short-term.
Year-to-date, the iShares iBoxx $ Investment Grade Corporate Bond ETF (NYSEArca: LQD), which has a 3.59% 30-day SEC yield, dipped 0.9% and Vanguard Intermediate-Term Corporate Bond ETF (NYSEArca: VCIT), which has a 3.53% 30-day SEC yield, was up 0.6%.
Tax-exempt bonds also offer compelling yields relative to taxable fixed-income assets of the same maturity, Koesterich added.
For instance, the iShares National AMT-Free Muni Bond ETF (NYSEArca: MUB), which has a 4.73 year duration, comes with a 1.75% 30-day SEC yield or a 3.09% taxable equivalent 30-day SEC yield for those in the highest income bracket. The SPDR Nuveen Barclays Municipal Bond ETF (NYSEArca: TFI), which has a 7.65 year duration, shows a 2.07% 30-day SEC yield or 3.65% taxable equivalent yield. The Market Vectors Intermediate Municipal Index ETF (NYSEArca: ITM), which has a 7.15 year duration, comes with a 2.29% 30-day SEC yield or a 3.8% taxable equivalent 30-day SEC yield.
Lastly, while BlackRock remains cautious of U.S. Treasuries, Koesterich pointed to TIPS as an alternative for fixed-income exposure and a potential hedge against inflation. For instance, the iShares TIPS Bond ETF (NYSEArca: TIP) tracks government bonds whose face value are adjusted based on Consumer Price Index, so the ETF helps protect against intermediate-term inflation.
For more information n the fixed-income market, visit our bond ETFs category.
Max Chen contributed to this article.