Reducing Duration With Corporate Bond ETFs


According to Bank of America Merrill Lynch index data, risk premiums on U.S. investment-grade corporate debt have been cut by half a percentage point since mid-February due to rising demand from Asian and European investors. Hans Mikkelsen, head of U.S. investment-grade credit research at Bank of America Merrill Lynch, anticipates that by the year-end, premiums could dip to about 1.5 percentage points from current levels of around 1.72 percentage points as European and Asian investors funnel as much as $500 billion into American corporate bonds in 2016, or up 50% year-over-year.

VCSH “was created in November 2009 to track the investment results of the Barclays U.S. 1-5 Year Corporate Bond Index, which is composed of investment-grade corporate bonds with maturities ranging between one and five years. The fund gathered $11.5 billion in AUM and had 1,994 bonds in its portfolio. VCSH is heavily tilted toward corporate bonds issued by industrial companies with 54% allocation and financial services firms with 40.4% allocation,” reports Investopedia.

Vanguard Short-Term Corporate Bond Index Fund