- Falling Treasury yields have helped push the total return on the Barclays U.S. Corporate Bond Index to 6.6% so far this year, above most other types of fixed-income investments.
- Although yields on investment-grade bonds have fallen, their spreads compared to Treasuries are near the historical median, making them fairly valued, in our view.
- Despite the relatively low yields, we still think investment-grade corporate bonds offer an attractive yield relative to Treasuries.
After a disappointing 2013, investment-grade corporate bonds are once again delivering positive returns, thanks mainly to price gains linked to falling Treasury yields. And although yields on investment-grade corporate bonds are now near all-time lows, we still think they look attractive relative to Treasuries and make sense for investors looking to generate income without incurring too much risk.
Positive total returns
The Barclays U.S. Corporate Bond Index has generated a total return of 6.6% this year—a nice improvement from its 1.5% drop in 2013. In fact, investment-grade corporate bonds have performed better than most other types of fixed income investments this year, including sub-investment-grade bonds, as you can see in the chart below.
Investment-grade corporate bonds have posted strong year-to-date total returns