BBB-Rated Corporate Bonds Could Offer Less Volatility

Treasury yields are on the rise following new economic data and upcoming indicators from the Federal Reserve. The Fed meets again on Wednesday. Analysts don’t expect an announcement about rate changes. However, eyes are glued to any potential signals of what the Fed aims to do next. Rising yields have made matters a little trickier for U.S. investment-grade corporates, but according to recent BondBloxx research, the 1-5 year maturity BBB index showed strong performance among fixed income options. The research noted that short and intermediate BBB credit spreads tightened in February. Meanwhile, all-in yields for BBB investment-grade corporates climbed.

“We like BBB corporates for the higher income and total return potential they offer versus the broad U.S. Corporate Index and the other components of the U.S. Aggregate Index. Within the BBB rating category, we are especially constructive on the 1-5 year and 5-10 year maturity ranges. Which we believe can help investors capture attractive yield and total return potential with less volatility than other investment-grade alternatives,” the BondBloxx research added.

BondBloxx offers several ETF options for investors seeking to capitalize on the strength of BBB-rated bonds. The BondBloxx BBB Rated 1-5 Year Corporate Bond ETF (NYSE Arca: BBBS) can offer more precise exposure to shorter-duration corporate bonds. This approach could offer investors current yields while mitigating potential risks down the line.

Alternatively, investors seeking a longer bet may consider giving the BondBloxx BBB Rated 5-10 Year Corporate Bond ETF (NYSE Arca: BBBI) a shot. The extended duration may aid investors in gaining an advantage from possible rate cuts. Meanwhile, the investment-grade corporate bond assets help shield from potential volatility.

These funds are fairly recent additions to the BondBloxx library, released in January 2024 alongside the longer-duration $5 million Bondbloxx BBB Rated 10+ Year Corporate Bond ETF (NYSE Arca: BBBL). BBBS currently oversees roughly $2.5 million in assets under management, while BBBI possesses about $5 million in AUM.

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