Investment Grade Corporate Bonds Proving Popular As Other Assets Fade (LQD)

We have reported outflows in Large Cap and Small Cap stocks lately (SPY, IWM), as well as longer duration Treasury bonds via TLT (iShares 20+ Year Treasury Bond, Expense Ratio 0.15%) in these daily pieces.

However, one asset class that is an exception to the recent tide of outflows in ETF land is that of Investment Grade Corporate Bonds, and we have witnessed inflows into LQD (iShares iBoxx $ Investment Grade Corporate Bond, Expense Ratio 0.15%) during the month of November to the tune of more than $515 million.

Interest rates in the marketplace have been rather volatile in the first two weeks of this month, and unlike long term Treasury bonds where it seems to have spooked some investors out of positions, LQD has attracted new monies lately even though the fund itself is trading at its lowest level since late August and is below its 50-day MA for the first time late October.

At $38.8 billion, LQD stands as the largest Investment Grade Corporate Bond focused ETF in the U.S. listed landscape, well ahead of the $21.6 billion VCSH (Vanguard Short-Term Corporate Bond, Expense Ratio 0.07%) and the $17.9 billion VCIT (Vanguard Intermediate-Term Corporate Bond, Expense Ratio 0.07%).

The current Yield on LQD is 3.16%, as compared to 2.50% in say TLT and 1.86% on an S&P 500 tracker such as SPY, so this could at least be partially responsible for the recent inflows and long interest in the fund in spite of rising interest rates in the very short-term.

There are also some other interesting Investment Grade Corporate Bond linked ETFs in the segment that have not gathered a ton of attention yet but are nonetheless worth paying attention too, especially as portfolio managers may reshuffle holdings going into year’s end. We are speaking of IGHG (ProShares Investment Grade-Interest Rate Hedged, Expense Ratio 0.30%, $387 million in AUM), MINC (AdvisorShares Newfleet Multi-Sector Income, Expense Ratio 0.76%, $252 million in AUM), LQDH (iShares Interest Rate Hedged Corporate Bond, Expense Ratio 0.25%, $76 million in AUM), PFIG (PowerShares Fundamental Investment Grade Corporate Bond Portfolio, Expense Ratio 0.22%, $51 million in AUM), and SKOR (FlexShares Credit-Scored U.S. Corporate Bond, Expense Ratio 0.22%, $50 million in AUM) to name just a few, noting that there are a total of forty-six funds in this category.

The iShares iBoxx $ Investment Grade Corporate Bond Fund (LQD) was trading at $119.90 per share on Tuesday afternoon, down $0.01 (-0.01%). Year-to-date, LQD has gained 4.26%, versus a 16.36% rise in the benchmark S&P 500 index during the same period.

LQD currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #1 of 67 ETFs in the Corporate Bond ETFs category.

Disclaimer: The content of this article is excerpted from a daily newsletter from Street One Financial. While ETF Daily News may edit the contents and add a relevant title to the piece, the author, Paul Weisbruch, does not endorse or recommend any issuer or security mentioned herein.

About the Author: Paul Weisbruch

paul-weisbruchPaul Weisbruch is the VP of ETF/Options Sales and Trading at Street One Financial. Prior to joining the team at Street One, Paul served as the Director of RIA and Institutional ETF Sales at RevenueShares ETFs from December 2007 until November of 2009. Before RevenueShares, Paul was employed by Susquehanna International Group from 2000 until 2007 serving in roles including OTC/NYSE Institutional Block Trading, Nasdaq/OTC Market Making, ETF/Derivatives Intelligence and Strategy, Algorithmic Trading, as well as acting as the PHLX Floor Specialist in the ETFs, SPY and DIA.Paul has been actively involved in the ETF space from both a product and trading standpoint since 2000. Additionally, Paul has well forged relationships with national RIAs, institutional pension fund managers and consultants, mutual fund and hedge fund managers, and also the ETF media. Co-authoring the “S1F ETF Daily” since 2009, the daily piece has become a must for many portfolio managers in the ETF space, with segments regularly appearing in the likes of Barron’s, WSJ, and for instance.

He holds his Series 4 (Registered Options Principal), 6, 7, 55 (Equity Trader), 63, and 65 licenses. He graduated from the University of Pittsburgh (B.S. – Economics), graduating magna cum laude, and has an MBA from Villanova University.