4 Corporate Bond Options as Credit Spreads Tighten

Core Insights - The forecast for more rate cuts in 2026 may lead to tighter credit spreads, prompting fixed income investors to consider corporate bonds for additional yield alongside Treasuries [1] - The tightening of spreads indicates an improvement in bond fundamentals, making corporate bonds more appealing as they present a lower risk premium compared to government debt [2] Corporate Bond Options - The Vanguard Total Corporate Bond ETF Shares (VTC) is recommended for core corporate bond exposure, complementing a fixed income portfolio focused on Treasuries, with a tilt towards investment-grade bonds [3] - VTC tracks the Bloomberg U.S. Corporate Bond Index, offering a 30-day SEC yield of 4.8% as of November 30, with a low expense ratio of 0.03% [4] Short and Medium Duration Funds - The Vanguard Short-Term Corporate Bond Index Fund ETF Shares (VCSH) is highlighted as an ideal option for mitigating rate risk, tracking the Bloomberg Barclays U.S. 1-5 Year Corporate Bond Index, primarily including A and BBB rated investment-grade bonds [5] - The Vanguard Interim-Term Corporate Bond ETF (VCIT) serves as a balanced option between rate risk and yield, tracking the Bloomberg U.S. 5-10 Year Corporate Bond Index, with a low expense ratio of 0.03% [6] Long-Term Bonds - For investors willing to accept added rate risk, the Vanguard Long-Term Corporate Bond Index Fund ETF Shares (VCLT) is suggested as a viable alternative to long-term Treasury ETFs, noted for its low expense ratio and yield of 5.61% as of December 4 [7] - VCLT tracks the Bloomberg U.S. 10+ Year Corporate Bond Index, including investment-grade, fixed-rate, taxable securities with maturities greater than 10 years, also featuring a 0.03% expense ratio [8]