IGIB is lower by 1.62% year-to-date, due in large part to rising interest rates. 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.
“Investment-grade corporate-bond returns are primarily driven by interest rates because their default risk is low. But because they do introduce credit risk, they offer higher expected returns than Treasury bonds with comparable interest-rate risk,” according to Morningstar.
IGIB is one of the cheapest funds in its category with an annual fee of just 0.06%, or $6 on a $10,000 investment.
For more trends in fixed income, visit the Fixed Income Channel.