Top-Quality Credit Fund Lures Most Cash Since June as Fed Pauses
Top-Quality Credit Fund Lures Most Cash Since June as Fed Pauses
(Bloomberg) -- As the Federal Reserve signals it’s on hold and an overall rosy U.S. economic picture emerges, investors are seeing the appeal of investment-grade corporate bonds.
BlackRock Inc.’s iShares iBoxx $ Investment Grade Corporate Bond ETF, ticker LQD, had its best three days of inflows since June, taking in a total of $702 million as of Wednesday, according to Bloomberg data. The $35 billion fund tracks an index composed of U.S. dollar-denominated, investment-grade corporate bonds.
Top-quality credit is on track for its best performance in a decade, with a year-to-date return of 14%. Global investors have been increasingly turning to U.S. bonds as they flee negative interest rates. At the same time, the Fed left rates unchanged at its last meeting, and Chairman Jerome Powell suggested borrowing costs won’t move anytime soon. St. Louis Fed President James Bullard said he sees no reason to change rates in 2020, the Wall Street Journal reported Thursday.
“With the Federal Reserve likely not adjusting rates in 2020, investors are looking to bond ETFs that combine healthy income generation with moderate credit and interest rate risk,” said Todd Rosenbluth, head of exchange traded funds and mutual fund research at CFRA Research. “LQD is highly liquid and inexpensive, appealing to both institutional and wealth management investors.”
To contact the reporter on this story: Claire Ballentine in New York at cballentine@bloomberg.net
To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, Dave Liedtka, Brendan Walsh
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