Bond Buyers Purge Government Debt for Corporate Debt

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Investment-Grade Corporate Bond ETF Options

As opposed to investing in the bond themselves, investors can look for similar exposure within investment-grade corporate bond ETF options like the iShares 1-3 Year Credit Bond ETF (NASDAQ: CSJ)ProShares Investment Grade—Intr Rt Hdgd (BATS: IGHG) and the Xtrackers Inv Grd Bd Intst Rt Hdg ETF (BATS: IGIH). All three reduce credit risk exposed to investors with debt holdings in investment-grade paper.

CSJ tracks the investment results of the Bloomberg Barclays U.S. 1-3 Year Credit Bond Index where 90 percent of its assets will be allocated towards a mix of 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 three years–this shorter duration is beneficial during recessionary environments.

IGHG tracks the performance of the Citi Corporate Investment Grade (Treasury Rate-Hedged) Index with long positions in investment grade corporate bonds issued by both U.S. and foreign domiciled companies. This is particularly important during market downturns when the propensity for a company to default on its debt is higher. As such, IGHG focuses on investment-grade issues to reduce credit risk.

IGIH seeks investment results that track the performance of the Solactive Investment Grade Bond – Interest Rate Hedged Index where a portion IGIH’s total assets will reside in long positions in U.S. dollar-denominated investment-grade corporate bonds. As in the case of IGHG, this strategy effectively eliminates exposure to riskier bonds with fund allocations in investment-grade issues.

For more trends in fixed income, visit the Fixed Income Channel.