As credit spreads tighten, LQD could be appealing because lower rated bonds are more sensitive to spread changes. Nearly 48% of LQD’s holdings are rated BBB, which is the lower end of the investment grade space.
“Narrowing credit spreads give lower-quality bonds a boost. The lower the bond’s credit quality, the more sensitive it is to changes in the credit spread. This fund has some spread risk since it has considerable exposure to bonds at the lower end of the investment-grade credit spectrum,” said Morningstar.
The research firm has a Bronze rating on LQD.
For more information on the fixed-income market, visit our bond ETFs category.
Tom Lydon’s clients own shares of LQD.