The corporate bond market essentially hit the jackpot after the Federal Reserve pulled the slot machine handle. This year thus far, corporations have already raised more than $1 trillion for bond issues in order to stave off the effects of the pandemic.
It’s giving corporations the ability to refinance their existing debt and current low rates.
“Interest rates are low and even though the spreads they’re paying are higher than they were paying in February, it’s still long-term cheap money,” said Andrew Brenner of National Alliance. Companies.
“You really don’t know if a second wave [of the virus] is coming or how the economy is going to bounce,” Brenner said. “You know it’s not going to be V-shaped for hotels. You know it’s not going to be V-shaped for airlines.”
Investors looking to get in on the corporate bond action, they can consider the Goldman Sachs Access Investment Grade Corporate Bond ETF (GIGB). GIGB seeks to provide investment results that closely correspond to the performance of the FTSE Goldman Sachs Investment Grade Corporate Bond Index.
The fund seeks to achieve its investment objective by investing at least 80% of its assets (exclusive of collateral held from securities lending) in securities included in its underlying index. The index is a rules-based index that is designed to measure the performance of investment-grade, corporate bonds denominated in U.S. dollars that meet certain liquidity and fundamental screening criteria.
Additionally, here are a pair of investment-grade corporate bond options:
- Vanguard Short-Term Corporate Bond ETF (VCSH ): VCSH tracks the performance of a market-weighted corporate bond index with a short-term dollar-weighted average maturity–the Bloomberg Barclays U.S. 1-5 Year Corporate Bond Index. VCSH debt holdings mirror those found within the index, so U.S. dollar-denominated, investment-grade, fixed-rate, taxable securities issued by the industrial, utility, and financial companies comprise the debt portfolio. Furthermore, in order to curb volatility in the bond markets, maturities are relatively short-duration issues–between 1 and 5 years until maturity.
- SPDR Portfolio Short Term Corp Bd ETF (SPSB): SPSB seeks to provide investment results that correlate with the Bloomberg Barclays U.S. 1-3 Year Corporate Bond Index. Once again, O’Leary would benefit from the reduced exposure to volatility with SPSB’s investment in shorter-duration debt with maturities less than three years. In addition, SBSP minimizes credit risk by constructing a debt portfolio that contains only investment-grade bonds with companies that are less likely to default.