Focusing on Valuation in Corporate Bonds
June 23, 2021
Watch Time 2:14 MIN
Investors today face a challenge: sacrifice income, or take on more risk.
Investment grade corporate bonds can provide higher yields versus Treasury bonds, however over the past decade corporate leverage has increased while credit spreads have declined.
Introducing a smarter approach to corporate credit:
VanEck Vectors Moody’s Analytics IG Corporate Bond ETF (MIG)
VanEck Vectors Moody’s Analytics BBB Corporate Bond ETF (MBBB).
MIG and MBBB use a forward looking assessment of risk and value that hundreds of the world’s largest institutional investors have relied on for decades.
The fair value of each bond is calculated daily through a process that is based on decades of corporate credit risk research, and is driven by market-based information like a company’s stock price, as well as its balance sheet information and many other inputs.
Bonds with similar credit ratings and maturities can have very different fair values. This process can identify bonds that are undervalued relative to their risk that may also offer attractive yields and upside potential, as the market recognizes the true value of these bonds over time.
At the same time, these strategies aim to avoid bonds which are overpriced or expected to decline in value in the future, due to a forecasted decline in credit quality or a downgrade to high yield.
The U.S. investment grade corporate bond market is vast. Owning the entire market means owning bonds that may be overpriced or have hidden risk. With the right tools, it’s possible to identify the most attractively valued bonds that may provide attractive yield and potential upside, while avoiding the rest.
MIG provides exposure to the most attractively valued bonds from the broad investment grade market, while MBBB, focuses on the BBB rated segment, and both avoid bonds most at risk of being downgraded to high yield, providing investors with attractive yield, without having to take on more risk.
To Learn more visit vaneck.com/corporatecredit
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