Yield-starved investors remain enthusiastic about iShares iBoxx $ Investment Grade Corporate Bond ETF (NYSEArca: LQD) and other investment-grade corporate bond ETFs.
Fueling the increased demand for debt assets, tumbling yields on safer government and corporate debt pushed investors towar riskier and higher yielding debt, like junk bonds. Furthermore, U.S. corporate bonds are enjoying a stronger tailwind in an environment of strong economic growth, healthy earnings and dropping default rates.
“With talk of tax reform swirling around Washington again, U.S. corporate-bond ETFs posted leading net inflows in the two weeks ended Oct. 4, while Treasury ETFs lost assets as investors sought better returns elsewhere,” reports Bloomberg. “Long-term bond funds, too, had outflows as investors lost some of their appetite for interest-rate risk and cut back on bets with higher durations.”
For the week ended Oct. 17th, investors added $654.1 million to LQD, a total surpassed by just two other ETFs. Year-to-date, LQD has added $10.5 billion in new assets. Only five ETFs have seen larger inflows.
The Vanguard Intermediate-Term Corporate Bond ETF (NYSEArca: VCIT) has also been a prolific asset gatherer, adding $6.9 billion in new assets. That puts VCIT tenth among all ETFs in terms of assets added this year.
“Among the corporate bond funds, high yield attracted $1.6 billion in cash, equal to 2.8 percent of assets under management, while $2.3 billion went into high grade funds, about 1.7 percent of AUM. Almost $540 million fled U.S. Treasury ETFs,” according to Bloomberg.
Related: 3 Bond ETF Strategies for a Rising Rate Environment
Investors interested in other high-yielding corporate debt exposures can also look to various ETF options, including the SPDR Barclays High Yield Bond ETF (NYSEArca: JNK), which has a 4.98% 30-day SEC yield; Deutsche X-trackers USD High Yield Corporate Bond ETF (HYLB); AdvisorShares Peritus High Yield ETF (NYSEArca: HYLD), which has a 7.23% 30-day SEC yield; and the VanEck Fallen Angel High Yield Bond ETF (NYSEArca: ANGL), which has a 4.85% 30-day SEC yield.
For more information on corporate debt, visit our corporate bonds category.
Tom Lydon’s clients own shares of LQD.