Short-Dated LQD, HYG Clones Near Launch

October 04, 2013

Corporate bond investors are about to get new short-dated tools to manage interest-rate risk.

iShares has updated its prospectus of two short-dated corporate bond ETFs that it put into registration in July—a high-yield fund and an investment-grade fund—complete with tickers and prices, suggesting the launches are coming soon. The funds will address investor appetite for shorter-duration debt as the era of ultra-low yields looks to be on the verge of beginning to end.

The new funds, the iShares 0-5 Year High Yield Corporate Bond ETF, and the iShares 0-5 Year Investment Grade Corporate Bond ETF, are iterations of two similar, but longer-dated corporate bond ETFs, the $17 million iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD | B-64) and the $15 billion iShares iBoxx $ High Yield Corporate Bond ETF (HYG | B-64).

The two ETFs now in registration cherry-pick the shorter half of each of those existing funds’ targeted holdings. Rolling out two shorter-duration corporate bond funds will allow investors to more carefully calibrate corporate-bond exposure to minimize the possibility of capital losses should official interest rates and bond yields end up heading higher in the not-too-distant future.

The iShares 0-5 Year High Yield Corporate Bond ETF (SHYG) will hold U.S.-dollar-denominated, high-yield corporate bonds with less than five years before maturity, tracking the Markit iBoxx USD Liquid High Yield 0-5 Index. The fund’s expenses is 0.50 percent, or $50 dollar for every $10,000 invested.

The iShares 0-5 Years Investment Grade Corporate Bond ETF (SLQD) will track the Markit iBoxx USD Liquid Investment Grade 0-5 Index, which holds investment-grade corporate bonds with at least $500 million face-value and no more than five years until maturity. The fund’s expense ratio is 0.15 percent, or $15 for every $10,000 invested.


Find your next ETF

Reset All