April’s bout of volatility stung major gauges of investment-grade corporate bonds. However, some market observers believe recent weakness could represent a buying opportunity with high-quality corporate debt.
Some ETFs have stood strong against the recent calamity in credit markets. While the widely followed iBoxx $ Liquid Investment Grade Index is sporting a small year-to-date loss, the Invesco Investment Grade Defensive ETF (IIGD ) is living up to its defensive billing as highlighted by a 1.19% gain since the start of 2025.
For investors looking to capitalize on corporate credit opportunities, IIGD could be the right idea at the right time. The ETF follows the Invesco Investment Grade Defensive Index, which is basket of corporate bonds with high-quality credit grades and short maturities. IIGD’s effective duration is just 3.43 years. The ETF is an option to consider in an effort to mitigate both credit and rate risk.
Good Time to Investigate IIGD
No one likes sharp pullbacks, which is exactly what took place in the bond market following “Liberation Day.” However, that retrenchment may have made high-grade corporate debt, including IIGD holdings, more inviting.
“The recent rise in IG credit yields has been driven by both higher rates and wider spreads,” noted Goldman Sachs Asset Management (GSAM). “We believe these historically attractive yields provide appealing income and offer investors significant total return potential. In our view, recent market volatility has improved valuations compared to the elevated levels at the start of 2025, enhancing income potential.”
With IIGD, “defensive” isn’t just talk. The ETF makes good on that promise as 80% of its 158 holdings are rated AA or A – a positive attribute at a time when downgrades could in the space could increase.
“Encouragingly, the starting point for IG credit fundamentals in the face of the tariff shock is strong,” added GSAM. “We anticipate some increase in downgrades to high yield from the dormant level of 2024 but expect volumes to remain below previous downturn peaks. Therefore, we believe IG corporate credit will continue to be resilient relative to other risk assets.”
IIGD's Income
Even with the benefits of high credit quality and low duration, IIGD doesn’t cheat investors on income. Its 30-day SEC yield of 4.47% is in line with the 4.5% seen on broad measures of global investment-grade corporates. In fact, that yield could be a reason to examine IIGD more closely.
“We believe these elevated carry levels offer a buffer against potential spread widening. Furthermore, improved valuations compared to the beginning of 2025 provide us, as active investors, with opportunities to increase exposure to high-conviction ideas if we find risk premiums to be attractive, while remaining vigilant regarding risks from tariffs and slower economic growth,” concluded GSAM.
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