The deterioration in the value of bonds from AIG, Barclays Capital and Wachovia has taken a toll on the iBoxx $ Investment Grade Corporate Bond Fund (LQD).
After trading over $100 for the past year, LQD declined over 10% in mid-September and closed last week at $90 which was $1.58 below NAV and effectively raised the 30 day SEC yield to 6.84%.
The $3.8 billion ETF invests in highly liquid, investment grade corporate bonds and is diversified across 100 issues.
As of Friday, the fund’s concentration in banks was below 22% and totaled less than 17% in financial services companies such as American Express and Berkshire Hathaway.
The balance of the portfolio is spread across Pharmaceuticals, Health Care, Telecom, Media and Retailers.
Investors with a higher risk appetite should consider the iBoxx $ High Yield Corporate Bond Fund (HYG) which holds 50 corporate bonds, has a 30 day SEC yield of 10.75% and, ironically, has no exposure to banks or financial services.
See the ETF Directory for a complete listing of fixed income ETFs.