U.S. Corporate Bond ETFs Among Few Attractive Investment-Grade Options Left

With yields depressed all around, investors may find that corporate bond exchange traded funds offer some of the best yields around in the investment-grade debt category.

For instance, the iShares iBoxx $ Investment Grade Corporate Bond ETF (NYSEArca: LQD) has a 8.58 year duration and a 2.97% 30-day SEC yield, Vanguard Intermediate-Term Corporate Bond ETF (NYSEArca: VCIT) has a 7.5 year duration and a 2.91% 30-day SEC yield, and SPDR Barclays Intermediate Term Corporate Bond ETF (NYSEArca: ITR) has a 4.45 year duration and a 2.32% 30-day SEC yield.

Bank of America Merrill Lynch credit strategist Hans Mikkelsen pointed out that U.S. corporate bonds make up about 12% of all global investment-grade rated debt, and they also account for 33% of total investment-grade income, reports Justin Lahart for the Wall Street Journal.

Like other fixed-income assets, investment-grade U.S. corporate bonds have declined. However, corporate bond yields remain much more attractive. For instance, interest rates on 7-to-10 year bonds of high-quality U.S. companies are 3.14%, compared to 3.92% a year ago. In contrast, the yields on benchmark 10-year Treasury notes were at 1.38% after touching a record low of 1.321% on Wednesday.

Related: Record Low Yields Help Treasury ETFs Maintain Momentum

Consequently, the relative attractiveness of U.S. corporate debt has attracted billions of investor cash from all over the world.