With a strong possibility of the Federal Reserve raising interest rates in December, advisors and investors are once confronting what impact the central bank will have on fixed income portfolios and the corresponding exchange traded funds.
Although some investors recently departed investment-grade corporate bond exchange traded funds due to debate regarding the Federal Reserve’s next policy move, funds such as the iShares iBoxx $ Investment Grade Corporate Bond ETF (NYSEArca: LQD), SPDR Barclays Short Term Corporate Bond ETF (NYSEArca: SCPB) and the SPDR Barclays Intermediate Term Corporate Bond ETF (NYSEArca: ITR) still merit consideration by investors.
Investment-grade-rated debt issuers halted sales in August as a response to the sudden spike in volatility and uncertainty over a potential September Federal Reserve rate hike, reports Cynthia Lin for the Wall Street Journal.
The good news is that investment-grade corporates now look inexpensive and investors can use select ETFs to gain exposure to lower duration bonds that are less sensitive to fluctuations in interest rates.
As for a lack of new issues coming to market, well, the Fed has taken care of that.
“Government bond traders weren’t the only financial professionals to jump following the release of the October Fed policy statement, which suggested the Fed could liftoff as soon as December. Corporate finance execs also rushed to prepare bond offerings to take advantage of still low rates,” reports Amey Stone for Baron’s.