A Refreshed Look at an Intermediate-Term Corporate Bond ETF

The iShares Intermediate-Term Corporate Bond ETF (NASDAQ: IGIB) is the new look on the exchange traded fund formerly known as the iShares Intermediate Credit Bond ETF (NASDAQ: CIU). The name and ticker changes went into effect earlier this month.

IGIB “seeks to track the investment results of an index composed of U.S. dollar-denominated investment-grade corporate bonds with remaining maturities between five and ten years,” according to iShares.

IGIB tracks the ICE BofAML 5-10 Year US Corporate Index. The $5.86 billion IGIB holds over 1,670 bonds and has an effective duration of 6.24 years, which is mostly inline with the category average. Duration measures a bond’s sensitivity to changes in interest rates.

In the current interest rate environment, many fixed income investors are flocking to short-term bond funds while eschewing long-date fare. Sometimes, the middle part of the curve is appropriate to consider as well.

Inside IGIB

In a rising rate environment, the price of older bonds with lower rates will fall since these older debt securities appear less attractive and traders would demand a discount on the older lower-yielding debt. On the other hand, new bonds are issued at the newer and higher rates, so investors would be less inclined to hold older debt securities with less attractive yields. As a result, the less appealing older bonds will see prices fall in response to the diminished demand.

Related: Balancing Different Risks in Today’s Bond Market