2024-06-20 12:23:07 ET
Summary
- Institutions prefer intermediate duration bonds in the current high rate environment.
- The SPDR Portfolio Corporate Bond ETF seeks to mimic the Bloomberg U.S. Corporate Bond Index.
- The fund invests in a diversified portfolio of investment-grade corporate bonds with an average maturity of 7 years. It currently offers a yield of 5.34%.
- Currently, credit spreads are at historic lows - this means that the difference in yield between corporate bonds and risk-free treasuries is low. If credit spreads widen the price of SPBO will go down.
- Suggest waiting for a situation where corporate bond prices fall due to credit worries (which would increase credit spreads). This would be a better time to buy SPBO because you would be locking in a higher yield.
Thesis
Intermediate duration bonds seem to be the preferred way for institutions to take advantage of the current high rate environment. Some market participants believe that long maturity bonds have too high of a duration profile in an uncertain debt placement environment for the U.S. Treasury, whereas intermediate bonds offer the best of both worlds....
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For further details see:
SPBO: Intermediate Duration Corporate Bond Fund, 5.4% Yield