Time is Right for Investment-Grade Corporate ETFs

Those wary of the potential credit risks should keep in mind that these corporate bond ETFs focus on investment-grade debt securities. Specifically, LQD has 2.4% in AAA-rated corporate bonds, 12.5% AA, 40.2% A and 44.6% BBB. VCIT includes 1.3% Aaa, 7.9% Aa, 36.5% A and 54.3% Baa.

Higher-quality corporates also offer value.

“It also looks relatively attractive versus high yield. At the beginning of 2016, U.S. high yield spreads were among the widest versus investment grade since the financial crisis. A year later, that ratio is back near post-crisis lows. We see investment grade debt as attractive in the tradeoff between yield and risk,” adds BlackRock.

For more information on corporate debt, visit our corporate bonds category.

Tom Lydon’s clients own shares of LQD.