Fearing that the global economy is weaker than most expected, some investors have started to pull assets out of equities and turn to bonds.
Disappointing employment numbers in the United States and rising debt levels in Europe have many questioning whether the recent uptrend in equities is sustainable and has made bond exchange traded funds (ETFs) an attractive investment option.
To further add to their appeal, the Fed is expected to keep short term interest rates close to zero which makes bond yields more appealing than a run-of-the mill money market fund. Additionally, bonds are generally a good place to stash extra cash in the event of a market correction, which some believe may be occurring sooner rather than later.
When it comes to choosing a bond ETF, there are a number of choices and ETF providers continue to bring new products to market. Most recently, bond giant, PIMCO, launched the PIMCO Short Term Municipal Bond Strategy Fund (SMMU), enhancing the firm’s line up of actively managed ETFs covering the municipal yield curve.
Some of other more common bond ETFs include:
- iShares Barclays Tips Bond Fund (TIP), which offers protection against inflation.
- iShares iBoxx $ Investment Grade Corporate Bond Fund (LQD), which offers lower risk corporate bonds.
- iShares Aggregate Bond Fund (AGG), which gives diversified exposure to bonds, including Treasuries and corporate bonds.
