Large Retailers are Joining in on the Corporate Bond Party

It’s been a challenging environment for retailers as the coronavirus pandemic has forced them to change their business models to rely more heavily on online sales thanks to social distancing and lockdown measures across the globe. As the Federal Reserve is in the midst of a corporate bond-buying spree, retailers have joined in on the party for a cash infusion.

Furthermore, retailers who still rely on brick-and-mortar operations are in even more dire straits as opposed to those that can heavily draw from sales online.

“Analytics firm Intelligize Inc. looked at the 100 online largest retailers based in North America listed in the 2020 Digital Commerce 360 Top 1000 and found 13 of them issued $38.823 billion worth of bonds from March 1 through May 8,” a Digital Commerce 360 article pointed out. “During the same period in 2019, the same universe of retailers made three bond offerings, totaling $8 billion. Half of the 2019 total for the period consisted of $4 billion in bonds issued by Walmart Inc. (No. 3 in the Top 1000). The results for each year included only bond issues registered with the U.S. Securities and Exchange Commission for sale to the public.”

“Corporations issue bonds to raise financing for a variety of reasons such as to fund ongoing operations, mergers, and acquisitions, or expanding the business,” the article added. “The term is usually applied to longer-term debt instruments, with a maturity of at least one year. Corporate debt instruments with maturity shorter than one year are referred to as commercial paper.”

With more retailers moving to bring debt issues to the bond market, one ETF to consider is the Goldman Sachs Access Investment Grade Corporate Bond ETF (GIGB). GIGB seeks to provide investment results that closely correspond to the performance of the FTSE Goldman Sachs Investment Grade Corporate Bond Index.

GIGB Chart

GIGB data by YCharts

The fund seeks to achieve its investment objective by investing at least 80% of its assets (exclusive of collateral held from securities lending) in securities included in its underlying index. The index is a rules-based index that is designed to measure the performance of investment-grade, corporate bonds denominated in U.S. dollars that meet certain liquidity and fundamental screening criteria.

Another fund to look at is the iShares Long-Term Corporate Bond ETF (IGLB). IGLB seeks to track the investment results of the ICE BofAML 10+ Year US Corporate Index, which measures the performance of investment-grade corporate bonds of both U.S. and non-U.S. issuers that are U.S. dollar-denominated and publicly issued in the U.S. domestic market and have a remaining maturity of greater than or equal to ten years.

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