Tax Reform Could Be a Boon for Corporate Bond ETFs

Consequently, if the supply of new debt dips, existing bond prices, along with related corporate bond ETFs, could see prices rises.

A tax overhaul “could have the largest impact on corporate finance in decades,” David Brown, head of global investment-grade credit at investment management firm Neuberger Berman, told the WSJ. “It could structurally change the way companies look to finance themselves.”

The U.S. corporate bond market is a behemoth in the global financial system, providing cash for a variety of ventures and projects. According to data provider Dealogic, nonfinancial, investment-grade companies in the U.S. have borrowed over $800 billion this year alone, which has already broken the full-year record of 2015.

Fixed-income ETF investors could also capitalize on the potential changes through investment-grade corporate bond-related ETFs, such as the iShares iBoxx $ Investment Grade Corporate Bond ETF (NYSEArca: LQD), Vanguard Intermediate-Term Corporate Bond ETF (NYSEArca: VCIT) and SPDR Portfolio Intermediate Term Corporate Bond ETF (NYSEArca: SPIB).

For more information on the credit market, visit our corporate bonds category.