Income Investing: $AGG & $LQD?

May 22, 2023

Date: 22 May 2023

Source: https://www.barrons.com/articles/bonds-buying-opportunity-fed-rate-pause-d07e3781

Notes according to the article:

• “Intermediate maturities…are the best best for stable income”
• “Investment-grade corporate bonds are now yielding around 5%, up from about 2.8% two years ago”
• “…last year [2022], when U.S. bonds lost a dismal 13% on a total return basis.”
• “In June, the Fed is expected to pause—meaning hold rates steady, after raising them at each meeting since March of last year”
• “Rate cuts will boost bond prices and decrease yields, eating away at future total returns”
• “The sweet spot on the yield curve is between about three and seven years, unlike last year, when the short end of the curve was more attractive. It’s not a bad thing to own some duration right now”
• “Investors piling into three-month Treasury bills at around 5.2% should remember that’s an annualized yield, Janasiewicz says. To achieve it, you’d need to reinvest your T-bill at the same rate three more times as it matures”
• “Exchange-traded funds like iShares Core U.S. Aggregate Bond (ticker: AGG) offer exposure to high-quality U.S. bonds in the belly of the yield curve. The average yield to maturity is 4.33%. That fund includes Treasuries; for corporate-only exposure,
• the iShares iBoxx$ Investment Grade Corporate Bond ETF (LQD) now yields 5.03%”
• “With junk bonds offering rates of 8%”