With Treasury notes offering basement-level yields, it’s provided a challenging market for fixed income investors who are starving for more. There are still opportunities to delve deeper into the bond market, such as corporate bonds, which has spurred a higher level of activity in the space and the bond market in general.
Thanks to a Federal Reserve that appears keen on cutting interest rates, it’s caused a corporate scramble for credit.
“Companies might as well take advantage while they can. Corporations are getting in while the credit window remains wide open as you just never know when it slams shut,” said Greg Peters, head of multisector and strategy at PGIM Fixed Income, which oversees more than $809 billion in assets under management.
A lot of market mavens are trumpeting the benefits of shifting into value and away from growth in the current market environment, but how can that translate into the fixed income space? One area is investment-grade bond exchange-traded funds (ETFs) that offer quality debt.
While an inverted yield curve is flashing a recession signal, does this mean that inflation is out of the question?
“From where I sit obviously money is very cheap right now and bond prices reflect a full-blown recession, but I don’t think that’s in the offing,” said Eddy Vataru, a portfolio manager at the Osterweis Total Return fund. “We are going through a weak patch now but it feels like as the days pass and it’s clear that inflation is not obsolete, the market will have to re-price for that.”
While bonds have been the default safe haven amid the recent volatility in the equities market, it can be daunting to look at all the options, such as government debt and corporate bonds. One way to go about building a proper bond portfolio is to consider the risks first and foremost.
When delving into corporate bonds, here are the most active thus far in 2019:
|Symbol||ETF Name||Avg Volume|
|LQD||iShares iBoxx $ Investment Grade Corporate Bond ETF||11,466,554.00|
|VCIT||Vanguard Intermediate-Term Corporate Bond ETF||2,176,052.00|
|FLOT||iShares Floating Rate Bond ETF||1,445,348.00|
|IGSB||iShares Short-Term Corporate Bond ETF||1,406,628.00|
|VCSH||Vanguard Short-Term Corporate Bond ETF||1,367,757.00|
|SPSB||SPDR Portfolio Short Term Corporate Bond ETF||1,302,828.00|
|SPIB||SPDR Portfolio Intermediate Term Corporate Bond ETF||1,250,320.00|
|FLRN||SPDR Barclays Capital Investment Grade Floating Rate ETF||1,088,878.00|
|IGIB||iShares Intermediate-Term Corporate Bond ETF||1,010,340.00|
|USIG||iShares Broad USD Investment Grade Corporate Bond ETF||592,905.00|