Investment-grade debt and bond-related exchange traded funds just can’t catch a break this year.

U.S. investment-grade debt has experienced one of the worst performance of any major sector of the fixed-income asset class so far this year, CNBC reports.

The iShares iBoxx $ Investment Grade Corporate Bond ETF (NYSEArca: LQD) declined 4.7% year-to-date, compared to the 2.5% dip in the Bloomberg Barclays U.S. Aggregate Bond Index.

ETF investors have also been avoiding the asset category, pulling some $3.5 billion from LQD so far this year, according to XTF data.

The Federal Reserve’s rising interest rates have been a main contributing factor in the downfall of investment-grade bonds this year. As the Fed hikes the short-term fed funds rate, longer-duration investment-grade bonds with historically low yields have appeared less attractive.

“The hit from interest rates has been a big deal,” Elaine Stokes, a fixed-income strategist and manager of several bond funds at Loomis Sayles, told CNBC.

Subscribe to our free daily newsletters!
Please enter your email address to subscribe to ETF Trends' newsletters featuring latest news and educational events.