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LQD

Corporate Bond ETF (LQD) Hits 52-Week Low

For investors looking to avoid underperformance, iShares iBoxx $ Investment Grade Corporate Bond ETF ( LQD ) is probably on their radar now. The fund just touched a 52-week low, and LQD is down nearly 8% from its 52-week high price of $123.90/share.

But is more pain in store for this ETF? Let's take a quick look at the fund and the near-term outlook on it to get a better idea on where it might be headed:

LQD in Focus

LQD targets the corporate bond world by tracking the Markit iBoxx USD Liquid Investment Grade Index and holds 1,462 securities in the basket. It focuses on high quality bonds (BBB and plus) with about 65% going to the mid-term bonds and 35% to the long-duration bonds. The fund has a relatively higher default risk and interest rate risk, with average maturity of 12.34 years and effective duration of 8.03 years (see: all the Investment Grade Corporate Bond ETFs here ).

Why the Move?

The fixed-income corner has been an area to watch lately, as the Fed seems to be strongly heading toward the first interest rate hike in almost a decade at its policy meeting to be concluded later in the day. Higher interest rates would push up the yields thereby hurting the bond prices and the related ETFs.

More Pain Ahead?

Currently, LQD has a Zacks ETF Rank of 3 or 'Hold' rating with a High risk outlook, so it is hard to get a handle on its future returns one way or the other. However, it seems that the ETF might continue its underperformance at least in the near term given a negative weighted alpha of 4.70% and moderate 20-day volatility of 6.26% . So, there is still some downside risk signaling caution, and investors should wait until the fixed income market bottoms out before building a position in this ETF.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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