“For global investors, investment-grade investors, there is only one game in town, and that is U.S. corporate bonds,” Bank of America’s Mikkelsen added.
Meanwhile, U.S. fixed-income investors can capture the potential growth opportunity in investment-grade corporate debt through ETF options. Investment-grade corporate bond ETF exposure include options like the iShares iBoxx $ Investment Grade Corporate Bond ETF (NYSEArca: LQD), Vanguard Intermediate-Term Corporate Bond ETF (NYSEArca: VCIT) and SPDR Barclays Intermediate Term Corporate Bond ETF (NYSEArca: ITR).
[related_stories]LQD tracks the Markit iBoxx USD Liquid Investment Grade Index, which is comprised of over 1000 high quality corporate bonds. The bond ETF is heavy on banking bonds at 26.4% of the underlying portfolio, followed by non-cyclical consumer 17.8%, communications 13.6%, energy 9.7% and technology 8.5%. The portfolio is comprised of investment-grade A-rated debt 44.0%, along with 43.2% in lower quality investment-grade BBB-rated debt. LQD has a 8.28 year duration, a 3.46% 30-day SEC yield and a 0.15% expense ratio.
VCIT follows the Barclays U.S. 5-10 Year Corporate Bond Index, which is comprised of about 1,700 investment-grade U.S. corporate bonds. The Vanguard option includes a larger 63.5% toward industrial companies and 30.9% in finance-related firms. The underlying portfolios credit risk is also largely made up of Baa 52.8% and A 38.6% debt. VCIT has a lower 6.5 duration, a 3.40% 30-day SEC yield and a 0.10% expense ratio.
ITR tracks the performance of the Barclays Intermediate US Corporate Index, which includes over 3,000 investment-grade corporate debt securities. The SPDR ETF option includes a similar 36.4% financial and 58.9% industrial breakdown. The fund, though, has a slightly higher quality mix, with a 10.2% in Aa rated debt, 40.3% in A, and 47.4% in Baa. ITR has a 4.39 year duration, a 2.77% 30-day SEC yield and a 0.12% expense ratio.