As the world’s largest and most liquid bond market, Treasurys continue to benefit from demand driven by the U.S. dollar’s status as the global reserve currency, deep institutional participation and the federal government’s historically strong credit profile, even after recent sovereign credit rating downgrades.
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The corporate bond market, however, has become increasingly active as companies race to finance the artificial intelligence buildout. Beyond soaring equity valuations, many of the largest technology companies have turned to the debt market to fund massive capital expenditure programs without issuing new shares and diluting existing shareholders.
Since the beginning of 2025, Alphabet Inc. (ticker: GOOG, GOOGL), Meta Platforms Inc. (META), Amazon.com Inc. (AMZN) and Oracle Corp. (ORCL) have collectively issued more than $300 billion of corporate debt. More recently, Nvidia Corp. (NVDA) issued $25 billion of investment-grade bonds in June 2026, while Space Exploration Technologies Corp. (SPCX) followed shortly after its initial public offering with a $25 billion corporate bond offering.
Most of these companies enjoy investment-grade credit ratings of BBB or higher, allowing them to borrow at relatively attractive interest rates. Still, the surge in issuance means investors should look beyond average maturity or credit quality when evaluating bond funds. Those seeking to avoid concentrated exposure to the technology sector, for example, may also want to review the underlying bond holdings and issuer weights within the portfolio.
Tax treatment is another important consideration. Unlike Treasury securities, whose interest is exempt from state and local income taxes, or many municipal bonds, whose interest may be exempt from federal income taxes, corporate bond interest is generally taxed as ordinary income at both the federal and, where applicable, state level. For investors in higher tax brackets holding these funds in brokerage accounts, that can materially reduce total returns.
That being said, corporate bonds typically offer higher yields than Treasury securities of similar maturity to compensate investors for taking on additional credit risk. Holding them through an exchange-traded fund, or ETF, also provides greater diversification and the convenience of monthly income distributions rather than the semi-annual coupon payments typical of individual bonds.
Here are seven of the best ETFs for investing in corporate bonds:
| ETF | 30-day SEC Yield | Expense Ratio |
| VanEck Moody’s Analytics BBB Corporate Bond ETF (MBBB) | 5.3% | 0.25% |
| iShares Broad USD Investment Grade Corporate Bond ETF (USIG) | 5.3% | 0.04% |
| iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) | 5.4% | 0.14% |
| State Street SPDR Portfolio Corporate Bond ETF (SPBO) | 5.3% | 0.03% |
| State Street My2030 Corporate Bond ETF (MYCJ) | 4.8% | 0.15% |
| Invesco Fundamental Investment Grade Corporate Bond ETF (PFIG) | 4.7% | 0.22% |
| Invesco BulletShares 2035 Corporate Bond ETF (BSCZ) | 5.3% | 0.1% |
VanEck Moody’s Analytics BBB Corporate Bond ETF (MBBB)
“When considering a corporate bond ETF, evaluate both the product fees and bid-ask spreads, as well as the costs of buying the underlying securities,” says Joy Yang, head of index product management and marketing at MarketVector Indexes. “Consider the liquidity of both the ETF shares and the underlying securities, and how they trade in both primary and secondary markets.”
MBBB specifically focuses on the BBB segment of the corporate bond market. This is the minimum for a company’s debt to be considered investment grade. The ETF’s benchmark screens for issuances trading at attractive valuations with a lower probability of ratings downgrades. After deducting a 0.25% expense ratio, MBBB currently pays a 5.3% 30-day SEC yield with a monthly distribution cadence.
iShares Broad USD Investment Grade Corporate Bond ETF (USIG)
In addition to BBB-rated issuers, companies may also carry A or AA ratings, while a select few, including Microsoft Corp. (MSFT) and Johnson & Johnson (JNJ), continue to hold the coveted AAA credit rating. Investors seeking exposure across the full investment-grade spectrum may prefer USIG, which holds more than 11,000 corporate bonds with just shy of $17.3 billion in assets under management.
USIG’s portfolio remains dominated by debt issued by large U.S. financial institutions, with consumer staples companies representing another significant allocation. Technology issuers, however, have steadily increased their presence as AI-related borrowing has accelerated and now account for 8.9% of the fund. USIG currently pays a 5.3% 30-day SEC yield after deducting a minimal 0.04% expense ratio.
iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD)
Investors looking to actively trade the investment-grade corporate bond market rather than simply buy and hold may prefer LQD. Although its 0.14% expense ratio is higher than USIG’s, the fund offers excellent liquidity, with a 0.01% 30-day median bid-ask spread and average daily trading volume of about 29 million shares. LQD currently pays a 5.4% 30-day SEC yield with monthly distributions.
LQD is also popular with options traders, who can use strategies such as selling covered calls to generate additional income. Investors who prefer to outsource that approach can instead consider the iShares Investment Grade Corporate Bond BuyWrite Strategy ETF (LQDW), which systematically writes covered calls on LQD in exchange for greater yield, albeit with higher fees and reduced upside potential.
[READ: How to Invest in TIPS: Treasury Inflation-Protected Securities.]
State Street SPDR Portfolio Corporate Bond ETF (SPBO)
“With over $2 billion in assets, and a fee of just 0.03%, SPBO represents a transparent, diversified, low-cost and liquid solution to seek the macro beta associated with U.S. corporate bonds,” says Matthew Bartolini, managing director and global head of research strategists at State Street Investment Management. This ETF passively tracks the Bloomberg U.S. Corporate Bond Index.
SPBO’s underlying portfolio is highly diversified with over 4,100 bonds, requiring a minimum $300 million par amount outstanding with at least one year until maturity. It basically represents the corporate bond segment of the popular Bloomberg Aggregate Bond Index. Income potential for SPBO matches USIG at 5.3% 30-day SEC yield, and the ETF is also fairly liquid with a 0.03% 30-day median bid-ask spread.
State Street My2030 Corporate Bond ETF (MYCJ)
Unlike individual bonds, most bond ETFs do not mature and return principal at maturity. Instead, ETFs such as USIG and LQD continuously sell bonds that no longer meet the index’s requirements and purchase new ones. However, target bond ETFs such as MYCJ combine the defined maturity profile of an individual bond with the diversification, intraday liquidity and monthly distributions of an ETF.
“With MYCJ, investors gain access to a diversified portfolio of corporate bonds aligned to a specific maturity date, making it easier to build a bond ladder and plan for future cash-flow needs,” Bartolini explains. “Unlike traditional corporate bond ETFs with a continuously rolling maturity profile, MYCJ offers greater precision around income and reinvestment planning.” The ETF pays a 4.8% 30-day SEC yield.
Invesco Fundamental Investment Grade Corporate Bond ETF (PFIG)
“PFIG offers investment grade corporate bond exposure through a fundamentals-based index approach,” says Jason Bloom, head of fixed income and alternatives ETF product strategy at Invesco. “The ETF tracks the RAFI Bonds U.S. Investment Grade 1-10 Index, which weights holdings using measures such as assets, sales, dividends and cash flow, rather than simply emphasizing the largest debt issuers.”
Compared with traditional market-cap-weighted corporate bond ETFs, PFIG places less emphasis on the largest debt issuers, resulting in a more balanced sector allocation. For example, banks account for just 8.5% of PFIG’s portfolio. The ETF charges a 0.22% expense ratio while offering a 4.7% 30-day SEC yield. However, liquidity for PFIG is slightly poorer due to a wider 0.17% median bid-ask spread.
Invesco BulletShares 2035 Corporate Bond ETF (BSCZ)
State Street is not the only ETF issuer offering target maturity bond funds. Invesco’s popular BulletShares lineup includes BSCZ, an investment-grade corporate bond ETF designed to terminate on or about Dec. 15, 2035. At that point, the fund is expected to distribute its remaining net asset value to shareholders, much like an individual bond returning principal. Until then, investors receive monthly distributions.
“Longer-maturity corporate bond ETFs like BSCZ may be useful for investors looking to extend income visibility or better align fixed-income exposure with future cash flow needs,” Bloom explains. “The trade-off is that longer-dated corporate bond exposure can be more sensitive to changes in interest rates and credit spreads.” BSCZ charges a 0.1% expense ratio and pays a 5.3% 30-day SEC yield.
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7 Best ETFs to Invest in Corporate Bonds originally appeared on usnews.com
Update 07/23/26: This story was published at an earlier date and has been updated with new information.
