Investment-grade corporate bonds had their best quarter in nearly a year as rate cut expectations pushed more investors into this asset class. Short-term bond funds, such as mutual funds and exchange-traded funds (ETFs), typically invest in government and corporate bonds with maturities of less than five years, making them attractive options for those seeking stability and higher yields.
US companies are actively safeguarding their investment-grade credit status, with relatively few of them slipping into riskier, high-yield tiers. This trend underscores the importance of maintaining a strong credit profile to access capital at favorable rates. The amount of global corporate debt rated by S&P Global Ratings has been on the rise, with a 3.3% increase in the 12 months leading up to July 1, 2024, largely driven by growth in emerging markets.
An investment grade rating signifies that a municipal or corporate bond presents a relatively low risk of default, making it an appealing choice for risk-averse investors seeking steady income. Despite already expensive spreads, corporate bonds remain in high demand, with no imminent trend reversal in sight. Global investors poured $3.6 billion into investment-grade corporate bond funds in a single week, demonstrating strong market confidence in this asset class.