“If the current investment grade credit spread level of 108 bps vs. its historical average of 122 bps seems tight, it is,” said SSgA. “It stands 11% below its average. However, when accounting for the fact that the 108 bps historical average is reduced by a period when the index’s credit quality was much higher, we could make the argument that the historical ‘neutral’ level should be 17 bps wider and stand at 133 bps.”

Just over 82% of SPSB’s holdings are rated A or Baa. In the current environment, there are advantages to consider with investment-grade ETFs like SPSB.

“Impacts of credit changes in the investment grade space will become particularly important if there is a risk off event, as investment grade debt may sell-off more than usual given this change in rating composition,” according to SSgA.

For more trends in fixed income, visit the Rising Rates Channel.