Bond Investors Just Swapped Credit Risk for Duration Risk

Investors spooked by the cracks in the junk-bond market are seeking refuge in higher-quality credit.

(Related: Junk-Bond Rout Snowballed After Wall Street Called Late Cycle)

The $1.9 billion in outflows from the two biggest high-yield exchange traded funds last week were nearly offset by the money poured into these four products over the same period: the iShares iBoxx Investment Grade Corporate Bond ETF (ticker LQD), the iShares Core U.S. Aggregate Bond ETF (ticker AGG), the Vanguard Long-Term Corporate Bond ETF (ticker VCLT) and the iShares 20+ Year Treasury Bond ETF (ticker TLT).

Substantially less credit risk is the common thread running through the ETFs. The four offer exposure to investment grade corporate, government-related and sovereign debt.