In ETF Trends’ Part 1 of looking at the best fixed-income ETFs to have during a recession, four ETFs were introduced that underscored the need to have shorter terms if possible and investment-grade holdings to reduce credit risk exposure during tumultuous times when companies have a higher risk of default.
While safe havens, such as government and municipal bonds may be deemed as less riskier than corporate bonds during a recession, an investor does not have to abstain from them completely to still extract the benefits of higher-yielding debt issues.
As such, here are four more ETFs that can be used during a recessionary economic climate.
SPDR Portfolio Short Term Corp Bd ETF (NYSEArca: SPSB)
SPSB seeks to provide investment results that correspond to the performance of the Bloomberg Barclays U.S. 1-3 Year Corporate Bond Index. SPSB invests at least 80 percent of its total assets in securities designed to measure the performance of the short-termed U.S. corporate bond market. Ideally, shorter-term bond issues with maturities of three to four years are ideal to minimize credit risk exposure in a recession.
Vanguard Interm-Term Corp Bd ETF (NASDAQ: VCIT)
VCIT seeks to track the performance of a market-weighted corporate bond index with an intermediate-term dollar-weighted average maturity, namely the Bloomberg Barclays U.S. 5-10 Year Corporate Bond Index. While VCIT holds debt issues with maturities between 5 and 10 years, they are all investment-grade holdings to minimize default risk.
iShares Intermediate Credit Bond ETF (NASDAQ: CIU)
CIU seeks to track the investment results of the Bloomberg Barclays U.S. Intermediate Credit Bond Index. The ETF’s focus is on investment-grade corporate debt and sovereign, supranational, local authority and non-U.S. agency bonds that are U.S. dollar-denominated and have a remaining maturity of greater than one year and less than or equal to ten years.
iShares iBoxx $ Invmt Grade Corp Bd ETF (NYSEArca: LQD)
LQD seeks to track the investment results of the Markit iBoxx® USD Liquid Investment Grade Index composed of U.S. dollar-denominated, investment-grade corporate bonds. LQD allocates 95 percent of its total assets in investment-grade corporate bonds to mitigate credit risk during times of a recession.
For more trends in the fixed-income space, visit our Fixed Income Channel.