Dzmitry Skazau
The margin of safety is always dependent on the price paid. It will be large at one price, small at some higher price, nonexistent at some still higher price.
- Benjamin Graham
Investment-grade bonds, just like equities, require
LQD: Slim Spreads And Rising Risks
Summary
- LQD's yield premium over Treasuries is near decade lows, offering little margin of safety for investment-grade bond investors.
- Credit quality is deteriorating, with rising delinquencies and a high concentration of BBB-rated and banking sector debt in LQD.
- Compressed spreads and elevated economic risks mean LQD holders face greater downside than they may realize, despite diversification.
- Fallen angel ETFs or intermediate Treasury ETFs present potentially better risk/reward alternatives to LQD in the current environment.
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