Get Short-Term Corporate Bond Exposure Without Breaking the Bank

The discerning ETF investor is not only looking at what gains a fund can provide, but at what price they’re willing to pay for that particular performance or exposure. Corporate bond ETF investors looking to keep their duration risk short at a low cost, can look at the iShares Short-Term Corporate Bond ETF (IGSB).

With its low 0.06% expense ratio, IGSB seeks to track the investment results of the ICE BofA 1-5 Year US Corporate Index. The fund generally invests at least 90% of its assets in securities of the underlying index.

The underlying index measures the performance of investment-grade corporate bonds of both U.S. and non-U.S. issuers that are U.S. dollar-denominated and publicly issued in the U.S. domestic market and have a remaining maturity of greater than or equal to one year and less than five years.

IGSB gives investors:

  1. Exposure to short-term U.S. investment grade corporate bonds
  2. Low cost, targeted access to bonds with 1-5 year maturities
  3. Use to customize a bond allocation and pursue income

IGSB Chart

Get Choosy In Today’s Bond Market

While corporate bonds may provide more yield than government bonds, there is a still a lot of market uncertainty floating around despite the deployment of a vaccine that’s rallying equities. That said, keeping duration risk short is an option with ETFs like IGSB.

Furthermore, the pandemic has riddled certain companies with even more debt in 2020 as the Federal Reserve stepped in to shore up the bond markets earlier this year. This allowed companies to take on more debt at the current low-interest rate environment.

In 2021, those companies will eventually have to start repaying that debt, and the ones in the most precarious positions after the pandemic could be at risk of defaulting.

“When the Federal Reserve cut interest rates to near zero earlier this year, yields fell across the board – most notably in short-duration bond funds, for which the Fed’s monetary policy often has the greatest influence,” a U.S. News & World Report said. “Ultra-low interest rates make it challenging to find yield, so investors need to be choosy, says Marc Pfeffer, chief investment officer at CLS Investments. Money that’s earmarked to be spent in one to two years should be kept in safe investments since people may not have time to recoup losses from volatile stocks. While yields in short-term bond funds are lower than they were at the beginning of the year, investors can still find some viable funds if they’re willing to take on some credit risk.”

For more news and information, visit the Equity ETF Channel.