A MSCI Liquidity Risk Monitor Report shows that near the tail end of 2021, a sizeable rise in costs was observed in corporate bonds.
This was the case when it came to high-yield and investment-grade bonds. Additionally, it was a global phenomenon, showing up in non-U.S. bonds for both developed and emerging economies.
That said, Vanguard has corporate bond ETF options that all come in at 0.04%. First is the Vanguard Interim-Term Corporate Bond ETF (VCIT).
Corporate bonds can give bond investors more yield, albeit more risk, so if anything beyond a 10-year maturity doesn’t fit in an investor’s risk profile, VCIT is ideal for this type of targeted exposure. Furthermore, VCIT presents a viable option for investors who still want to obtain higher yields that short-duration bonds can’t offer.
VCIT seeks to track the performance of a market-weighted corporate bond index with an intermediate-term dollar-weighted average maturity. The fund employs an indexing investment approach designed to track the performance of the Bloomberg U.S. 5–10 Year Corporate Bond Index, which includes U.S. dollar-denominated, investment-grade, fixed-rate, taxable securities issued by industrial, utility, and financial companies, with maturities between five and 10 years.
Long- or Short-Term Yield
For more yield and rate risk, there’s the Vanguard Long-Term Corporate Bond Index Fund ETF Shares (VCLT). As per the fund description, VCLT seeks to track the performance of a market-weighted corporate bond index with a long-term dollar-weighted average maturity.
Furthermore, the fund employs an indexing investment approach designed to track the performance of the Bloomberg U.S. 10+ Year Corporate Bond Index. This index includes U.S. dollar-denominated, investment-grade, fixed-rate, taxable securities issued by industrial, utility, and financial companies, with maturities greater than 10 years. Under normal circumstances, at least 80% of the fund’s assets will be invested in bonds included in the index.
For short-term duration to mitigate rate risk, there’s the Vanguard Short-Term Corporate Bond Index Fund ETF Shares (VCSH). VCSH seeks to track the performance of a market-weighted corporate bond index with a short-term dollar-weighted average maturity.
The fund employs an indexing investment approach designed to track the performance of the Bloomberg U.S. 1-5 Year Corporate Bond Index. This index includes U.S. dollar-denominated, investment-grade, fixed-rate, taxable securities issued by industrial, utility, and financial companies, with maturities between one and five years.
For more news, information, and strategy, visit the Fixed Income Channel.