Corporate Fixed-Income ETFs Gain

While investors have been fleeing from the safe haven of government debt, riskier assets with higher yields have been benefiting like corporate bond-focused fixed-income ETFs. The ProShares Investment Grade—Intr Rt Hdgd (BATS: IGHGgained 0.24% today, as did the ProShares High Yield—Interest Rate Hdgd (BATS: HYHG)–up 0.41% and the iShares Intermediate Credit Bond ETF (NASDAQ: CIU)–up 0.16%.

IGHG investment seeks investment results that track the performance of the Citi Corporate Investment Grade (Treasury Rate-Hedged) Index, which is comprised of long positions in USD-denominated investment grade corporate bonds issued by both U.S. and foreign domiciled companies and short positions in U.S. Treasury notes or bonds.CIU seeks to track the investment results of the Bloomberg Barclays U.S. Intermediate Credit Bond Index. The ETF’s focus is on investment-grade corporate debt and sovereign, supranational, local authority and non-U.S. agency bonds that are U.S. dollar-denominated and have a remaining maturity of greater than one year and less than or equal to ten years.

HYHG tracks the performance of the Citi High Yield (Treasury Rate-Hedged) Index and allocates 80% of its total assets in high-yield bonds and short positions in Treasury Securities in order hedge against rising rates. Because HYHG invests in high-yield bonds, there is credit risk associated with the higher yield since the fund invests in corporate issues that are less than investment-grade. By targeting a duration of zero, HYHG offers less interest rate sensitivity versus its short-term bond peers.

For more trends in fixed income, visit the Fixed Income Channel.