Amid what has been sanguine interest rate environment to this point in 2016, investors are renewing their enthusiasm for corporate bond exchange traded funds, including investment-grade and high-yield fare.
Bond investors who are wary of dipping too far into junk bond territory but want better yield payouts than Treasuries may consider investment-grade corporate bond exchange traded funds.
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.
With an interest rate hike looming as soon as June, investors may want to consider adding some active management to their bond ETFs with funds such as the AdvisorShares Newfleet Multi-Sector Income ETF (NYSEArca: MINC).[related_stories]
MINC, which is just over three years old, primarily holds high quality investment grade debt. The fund will overweight and underweight 14 different bond sectors as the portfolio manager builds a diversified and tactical portfolio. Bond holdings will have a low average duration, targeted between 1 and 3 years.