iShares iBoxx $ Investment Grade Corporate Bond ETF (3IS2)
XBER 
Summary
3IS2 Chart
LQD: High Expense Ratios And Tail Risks
The iShares iBoxx $ Investment Grade Corporate Bond ETF is not the lowest expense ratio option to target this particular duration. In addition to that, we are not terribly keen on long to very-long duration bonds. One of the issues we have, in addition to particularly low compensation for credit risk at the moment, is the low yield spread.
LQD: Be Careful Of The Dislocation Trap
We think higher credit spreads are probable to occur and that the iShares iBoxx $ Investment could face residual backlash after higher yield bonds, especially given the vehicle's sector concentration. Unsecured bond exposure heightens risk due to higher loss given default. Moreover, lower rates are anticipated, which could trigger call risk and/or reinvestment risk. An effective duration of 7.99 can lead to upside if interest rates settle lower. That said, dislocations usually occur, where duration turns negative in stressed economic environments.
LQD: A Bad Time For Investing In Corporate Bonds
The LQD ETF isn't offering enough extra yield compared to safer US government bonds to be worth the risk. Credit spreads remain too tight, in my opinion. This presents a risk for the current holders of corporate bonds in case of an economic slowdown in the US. I maintain my "Sell" rating on the LQD ETF.
iShares iBoxx $ Investment Grade Corporate Bond ETF (3IS2) FAQ
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iShares iBoxx $ Investment Grade Corporate Bond ETF Profile
| XBER Exchange | US Country |
Overview
This company specializes in investments with a focus on providing its clients access to the U.S. dollar-denominated liquid investment-grade corporate bond market. The company commits to invest a significant portion of its assets in the securities that are part of its underlying index, aiming to closely track the performance of said index. This underlying index is curated to offer comprehensive exposure to the investment-grade corporate bond market, reflecting the company’s strategy to emphasize quality, liquidity, and performance in its investment approach. The investment policy demonstrates a high degree of alignment with the characteristics of the underlying index, ensuring that at least 80% of its assets are invested in the component securities of the index, and a minimum of 90% of its assets are allocated towards fixed income securities that are expected to aid in tracking the index’s performance accurately.
Products and Services
- Component Securities Investments
Reflecting its strategic commitment, the company invests at least 80% of its assets in the component securities of the underlying index. This approach is designed to ensure that the investment portfolio closely mirrors the performance and composition of the index, providing investors with a transparent and closely aligned investment option in the corporate bond market.
- Fixed Income Securities Investments
In its pursuit of tracking the underlying index with precision, the company allocates at least 90% of its assets towards fixed income securities that are of the types included in the underlying index. This allocation encompasses investment-grade corporate bonds that are denominated in U.S. dollars, underscoring the company’s focus on liquidity and credit quality in its investment selection.
- Investment-Grade Corporate Bond Market Exposure
The underlying index that guides the company’s investment strategy is customized to offer a broad representation of the liquid, U.S. dollar-denominated, investment-grade corporate bond market. Through its investment strategy, the company provides investors access to a diversified portfolio of investment-grade corporate bonds, aimed at delivering stable returns with a focus on liquidity and creditworthiness.
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