Rising inflation has been causing benchmark yields to trend higher, and corporate bonds haven’t been immune to the 2022 rout in bond prices. That said, there are bargains to be had in the corporate debt market if investors know where to look.
The U.S. Federal Reserve is expected to continue tightening monetary policy, which is nudging yields even higher. With bond prices moving conversely with yields, bonds have been heading lower in tandem with the falling stock market.
When the pandemic hit the global market in 2020, investor capital poured into bonds, which pushed yields to the point where they turned negative in some countries. Now, the corporate bond market is seeing negative yields dissipate.
“Negative yields have vanished from the world’s corporate bond market as investors brace for monetary tightening,” a Bloomberg article notes.
“Every single note in a Bloomberg index tracking the global investment-grade corporate bond market yielded 0% or more at Friday’s close, calculated using the midpoint between bid and ask prices,” the article adds. “It’s a dramatic turnaround from August, when more than $1.5 trillion of debt, most of it in Europe, came with a sub-zero yield.”
Get Corporate Bond Exposure With VTC
Investors looking for bargains in corporate bonds may want to consider getting aggregate exposure with the Vanguard Total Corporate Bond ETF ETF Shares (VTC ). The fund seeks to track the performance of a broad, market-weighted corporate bond index.
The fund is a fund of funds, and employs an indexing investment approach designed to track the performance of the Bloomberg U.S. Corporate Bond Index, which measures the investment-grade, fixed-rate, taxable corporate bond market. The index includes U.S. dollar-denominated securities that are publicly issued by industrial, utility, and financial issuers.
- Performance tied to the Bloomberg U.S. Corporate Bond Index.
- Broad, diversified exposure to the investment-grade U.S. corporate bond market.
- A unique ETF of ETFs structure.
- An intermediate-duration portfolio with exposure to short-, intermediate-, and long-term maturities.
- Current income with high credit quality.
For more news, information, and strategy, visit the Fixed Income Channel.