The corporate bond market can thank banks for the rising demand in corporate debt as banks continue to load the proverbial boat with more debt to balance their cash reserves.

Big players like Goldman Sachs and Bank of America have been issuing billions in bonds after strong third quarter results. It’s not just the bonds that capital market investors are after, but also bank stocks, which have been strong performers this year.

“The six largest U.S. lenders have issued some $314 billion of bonds so far this year, already the most for any year since 2008, according to Dealogic,” the Wall Street Journal reported.

As mentioned, the boost in bond sales is helping to fuel the corporate debt market overall. Last year, corporate bond demand slowed as credit spreads tightened, causing investors to wonder whether they wanted to take on the added credit risk or stick with safer government bonds.

“Banks are playing a greater role in propelling the corporate bond market, which has otherwise slowed from last year’s pandemic-induced debt bonanza, ” the WSJ report added. “Financial institutions are the issuers behind more than a third of U.S. investment-grade debt so far this year, according to Dealogic, the highest share for any year going back to the dawn of the modern megabank.”

Capturing the Total Corporate Bond Market

While fixed income investors have the option to hold various debts from a wide range of companies, ETFs can make the process much easier. Consider getting complete corporate bond exposure with a fund like the Vanguard Total Corporate Bond ETF Shares (VTC).

As for VTC, the fund seeks to track the performance of a broad, market-weighted corporate bond index. The fund is a fund of funds, and employs an indexing investment approach designed to track the performance of the Bloomberg U.S. Corporate Bond Index, which measures the investment-grade, fixed-rate, taxable corporate bond market.

The index includes U.S. dollar-denominated securities that are publicly issued by industrial, utility, and financial issuers. The fund comes with a low expense ratio of 0.05%.

VTC offers:

  • Performance tied to the Bloomberg U.S. Corporate Bond Index.
  • Broad, diversified exposure to the investment-grade U.S. corporate bond market.
  • A unique ETF of ETFs structure.
  • An intermediate-duration portfolio with exposure to short-, intermediate-, and long-term maturities.
  • Current income with high credit quality.

For more news, information, and strategy, visit the Fixed Income Channel.