Over the past 20 years, there has been a significant shift in the ratings composition of the investment grade corporate bond universe. Using the ICE Bank of America Merrill Lynch US Corporate Index (C0A0) as a representation of this universe, the number of securities has grown by about 150% from 3,378 members in December of 1999 to 8,583 members in June 2020. As a greater number of securities and mix of issuers has increased, “BBB” rated bonds have grown substantially as a percentage of the index. In addition to the heavier presence of “BBB” ratings, the dispersion of “AAA”/“AA”/“A” rated bonds have made a gradual shift towards the lower rated portion. With the shrinking portion of the highest rated corporate bonds, the investment grade market has posed challenges in finding a competitive return while remaining up in quality.

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