More investors are dabbling in tactical or alternative fixed-income options in anticipation of a rising interest rate environment or overweighting equities all together. Intermediate-term bonds and the related exchange traded funds still have a place in portfolios.
For instance, investors can consider investment-grade, intermediate-term Treasuries, corporate bonds, or both.
Related: ETFs 101: What is a Bond ETF?
Currently, credit spreads are falling. Looking at corporate bonds, the diminish spread between government Treasury yields and corporate debt yields reflects investors’ lower perceived risks ahead. The Bank of America Merrill Lynch U.S./Corporate BBB Option-Adjusted Spread, which measures the borrowing costs of credit-worthy corporations, dipped to 2.07 percentage points in late April from 3.03 percentage points on February 11, reports Simon Constable for U.S. News.[related_stories]
The ongoing low-yield environment and improving economic sentiment has helped push investors toward corporate debt. However, potential investors should be aware that corporate bonds have historically exhibited grater volatility than U.S. Treasuries due to the increased volatility in corporate cash flows and credit risks, along with greater liquidity risks.
Intermediate-Term Corporate Bond ETFs
- Vanguard Intermediate Term Corp Bond (NasdaqGM: VCIT)
- iShares Intermediate Credit Bond ETF (NYSEArca: CIU)
- SPDR Barclays Intermediate Term Corporate Bond ETF (NYSEArca: ITR)
- Guggenheim BulletShares 2017 High Yield Corporate Bond ETF (NYSEArca: BSJH)
- Guggenheim BulletShares 2018 High Yield Corporate Bond ETF (NYSEArca: BSJI)
- Guggenheim BulletShares 2019 High Yield Corporate Bond ETF (NYSEArca: BSJJ)
- Guggenheim BulletShares 2017 Corporate Bond ETF (NYSEArca: BSCH)
- Guggenheim BulletShares 2018 Corporate Bond ETF (NYSEArca: BSCI)
- Guggenheim BulletShares 2019 Corporate Bond ETF (NYSEArca: BSCJ)
- iShares 0-5 Year Investment Grade Corporate Bond ETF (NYSEArca: SLQD)
- PowerShares LadderRite 0-5 Year Corporate Bond Portfolio (NasdaqGM: LDRI)
Intermediate-Term Government Bond ETFs
- Vanguard Intermediate-term Bond ETF (NYSEArca: BIV)
- iShares Core 1-5 Year USD Bond ETF (NYSEArca: ISTB)
- iShares 3-7 Year Treasury Bond ETF (NYSEArca: IEI)
- iShares 7-10 Year Treasury Bond ETF (NYSEArca: IEF)
- PIMCO 1-5 Year U.S. TIPS ETF (NYSEArca: STPZ)
- FlexShares iBoxx 3-Year Target Duration TIPS Index Fund (NYSEArca: TDTT)
- FlexShares iBoxx 5-Year Target Duration TIPS Index Fund Profile (NYSEArca: TDTF)
- SPDR Barclays 1-10 Year TIPS ETF (NYSEArca: TIPX)
- SPDR Barclays 0-5 Year TIPS ETF (NYSEArca: SIPE)
For more news and strategy on the Bond market, visit our Bond category.
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.