iShares 5-10 Year Investment Grade Corporate Bond ETF

IGIB

Market cap $17.1B

Vanguard Intermediate-Term Corporate Bond ETF and iShares 5-10 Year Investment Grade Corporate Bond ETF are both rated as buys for intermediate-term corporate bond exposure. VCIT stands out with lower costs, higher liquidity, a slightly higher dividend yield, and more flexible portfolio management, giving it a modest edge over IGIB. IGIB offers greater diversification and slightly higher credit quality, making it the more conservative choice, but VCIT's agility supports stronger long-term performance.

ICE BofA 5-10 Year US Corporate Index offers exposure to investment grade, US dollar-denominated corporate bonds. The index targets bonds with maturities between 5 and 10 years, balancing yield and interest rate risk. It serves as a benchmark for investors seeking stable income and moderate duration in the corporate bond market.

We think the Fed has time to assess the impact of tariffs, and we expect it to wait to cut rates until the data show that tariffs are impacting the real economy. So far, there are no signs of recession in the hard data. The tariff pause offers the possibility to avoid worst-case economic scenarios before the damage is crystalized. We believe technical factors will continue to drive market dislocations in spreads and sectors, and that active managers can navigate this more effectively.

The iShares 5-10 Year Investment Grade Corporate Bond ETF (IGIB) offers a balanced risk profile with a 6-year duration and a 5.38% yield to maturity. IGIB is less risky than IGLB but offers higher yields than AGG, making it ideal for cautious investors seeking income amid economic uncertainty. The ETF scores high on expenses, liquidity, and risk, with a low expense ratio of 0.04% and a diversified portfolio across various sectors.

Historically low credit spreads make any credit risk uninteresting. Duration is also not favorable, with Trump's rhetoric and possible actions contributing to upward revisions in inflation expectations. We also don't particularly like taking the credit approach to banking right now, with deregulation also on the agenda.

I favor the iShares 5-10 Year Investment Grade Corporate Bond ETF for its intermediate-term exposure and low expense ratio of 0.04%. Lower implied interest rates and a steepening yield curve could boost IGIB ETF's price returns in excess of the potential impact on the ETF's income component. I believe the IGIB ETF has a well-diversified portfolio, respectable dividend profile, and compelling expense ratio, which enhances its long-term total return prospects.

Rate changes bring ripple effects across the market, it's time to plan how to boost your income with them. We look at 3 sections of the market to dig deeper into. Build income goals, leverage money to achieve your dreams, and don't dream about money alone.

Taking on credit risk but not interest rate risk has been relatively rewarding to ETF advisors and investors thus far in 2024. The iShares Broad USD High Yield Corporate Bond ETF (USHY) had a year-to-date total return of 3.6% as of July 8.

The U.S. Federal Reserve plans to slow its quantitative tightening program, indicating a potential interest rate pivot. However, the interest rate environment remains uncertain. The iShares 1-5 Year Investment Grade Corporate Bond ETF has a shorter duration and lower credit quality risk compared to the iShares 5-10 Year Investment Grade Corporate Bond ETF. The market outlook suggests ongoing interest rate uncertainty, making IGSB a more suitable choice for reducing duration.

iShares 5-10 Year Investment Grade Corporate Bond ETF is a medium-term bond fund that holds dollar-denominated, investment-grade bonds. We go over why the fund may be a better medium-term equity proxy than the stock market as a whole. We go over why BDC bonds might give you an extra oomph for your income chase.