September Corporate Bond Issuance Puts Spotlight on This ETF

The month of September could market a record number of corporate bond issuance, putting the spotlight on one exchange-traded fund (ETF): the Vanguard Total Corporate Bond ETF ETF Shares (VTC).

The all-encompassing corporate bond fund could be seeing some inflows this month as companies gear up to offer their bonds for sale.

“Bankers and investors are bracing for a bumper month of debt issuance in the US, with pent-up supply from a quiet end to August set to be unleashed following the Labour day holiday this weekend,” a Financial Times article said. “September is always a busy month for corporate bond sales after the unofficial summer break. But participants say some parts of the market could rival the frenetic pace of new deals in the depths of last year’s pandemic shock when companies grasped for cash to survive.”

“The engine of supply is running on all cylinders,” said Jeanmarie Genirs, Deutsche Bank’s head of syndicate for US investment-grade deals. “While the market is engaged, we are telling people, ‘please, if you are ready to go, now is the time.’”

The height of the pandemic also saw a large number of corporate bond issuance, but it was for very different reasons. This time around, low borrowing costs are fueling a rise in issuance.

“Unlike 2020, when companies rushed to secure capital to outlast the pandemic downturn, this year has seen more opportunistic fundraising, with companies looking to lock in low borrowing costs over a longer time horizon or borrow to fund acquisitions and stock buybacks, rewarding shareholders,” the article added.

One ETF That Captures It All

VTC seeks to track the performance of a broad, market-weighted corporate bond index. The fund is a fund of funds and employs an indexing investment approach designed to track the performance of the Bloomberg Barclays U.S. Corporate Bond Index, which measures the investment-grade, fixed-rate, taxable corporate bond market.

The index includes U.S. dollar-denominated securities that are publicly issued by industrial, utility, and financial issuers. The fund comes with a low expense ratio of 0.05%.

Overall, VTC offers:

  1. Performance tied to the Bloomberg Barclays U.S. Corporate Bond Index
  2. Broad, diversified exposure to the investment-grade U.S. corporate bond market
  3. A unique ETF of the ETF structure
  4. An intermediate-duration portfolio, with exposure to short-, intermediate-, and long-term maturities
  5. Current income with high credit quality

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