Fixed income specialist BondBloxx Investment Management has introduced a trio of ETFs targeting BBB-rated corporate bonds from different maturity segments of the yield curve.

Tony Kelly, co-founder of BondBloxx Investment Management.

Listed on NYSE Arca with expense ratios of 0.19% each, the three funds are the BondBloxx BBB Rated 1-5 Year Corporate Bond ETF (BBBS US), BondBloxx BBB Rated 5-10 Year Corporate Bond ETF (BBBI US), and BondBloxx BBB Rated 10+ Year Corporate Bond ETF (BBBL US).

These first-of-their-kind ETFs are linked to Bloomberg indices that consist of fixed-rate, US dollar-denominated corporate bonds issued worldwide. Bonds within the indices must have par amounts outstanding of at least $300 million and have an average credit rating of BBB across the three major credit rating agencies.

Each index focuses on a precise maturity exposure, targeting bonds with remaining maturities of 1-5 years, 5-10 years, or greater than 10 years.

BondBloxx highlights that, over the last two decades, BBB-rated corporate bonds have outperformed the broader investment-grade corporate bond market by an average of more than 50 basis points annually, without incurring additional default risk. The firm notes that this outperformance is largely attributed to the historically higher coupon offered by BBB-rated bonds compared to the broader US investment-grade corporate bond universe.

Presently, BondBloxx points to the fact that yields on BBB-rated bonds are at 13-year highs – the yield-to-maturity on the 1-5 year, 5-10 year, and 10+ year strategies are currently 5.12%, 5.23%, and 5.73%, respectively. Combined with the resilient fundamentals of these companies as well as the general robustness of various US economic indicators, BondBloxx believes there are many signs that BBB-rated bonds could continue to outperform in 2024.

Commenting on the new listings, Tony Kelly, co-founder of BondBloxx Investment Management, said: “Investors who own broad investment-grade ETFs in different maturity categories can now use these new BondBloxx ETFs to target BBB-rated bonds and benefit from the higher coupon of this compelling segment within the investment-grade corporate bond market.”

JoAnne Bianco, Investment Strategist at BondBloxx Investment Management, added: “Investment-grade corporates continue to be an area of focus for investors, and within that universe, BBB-rated bonds offer a unique opportunity for potential outperformance. Yet until now, investors were quite limited in their portfolio-building options when it came to adding targeted BBB exposures. We’re excited to innovate and solve that issue for investors and advisors by bringing these new funds to market.”