The world of ETF academia is a rarefied one. But the spats it hosts are no less heated than those in the better known field of finance. And one of the hottest topics of debate right now is the bond market.
A “no landing” outlook for the economy has hit the bond market hard. High-quality short-term debt may be a good way to play it safe. But investors are piling into high-quality corporate bonds this year at a record rate, reflecting their enthusiasm for an asset class that is seen as relatively safe and with fewer risks of default than other investments.
Defaults always scare me — are yields worth the risk? The good news is that debt market specialists have been banging the drum on this for months: bonds are back. Now it appears this message has cut through, with even cautious investors piling into the asset class.
Spreads between yields on high risk companies' debt and Treasuries are at their lowest for 10 months. Investors are keen to take advantage of the relatively low yields available for corporate bonds, as well as the higher yields on longer-term bonds.
In 2022, bond investors suffered worse returns than they have in the last 250 years, according to an investment historian. But the tide is now turning, with investors increasingly turning to the corporate bond market as a safe haven in uncertain times.
After spending over two-and-half decades in the debt capital markets, the prospects for the corporate bond market to increasingly get a retail makeover are becoming more and more likely.
Investors can get in on that act with exchange traded funds such as the VanEck Moody's Analytics BBB Corporate Bond ETF (MBBB). MBBB holds 175 bonds across a variety of industries and has an expense ratio of 0.15%.
Investors who want to take advantage of the current boom in the bond market could do worse than to look at the VanEck Moody's Analytics BBB Corporate Bond ETF (MBBB). With the current economic uncertainty, high-quality corporate bonds are a relatively safe bet for investors looking for a steady return.