Which Corporate Bond ETF Is the Better Buy: iShares’ LQD or State Street’s SPLB?
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Choosing Between LQD and SPLB: What SA Investors Should Know
Two corporate bond ETFs offer different cost, yield, and risk profiles—here’s how to think about them from a South African perspective.
The US corporate bond ETFs LQD and SPLB differ sharply in cost and risk. SPLB’s ultra-low fees (0.04%) and higher 6% yield can be tempting, but it leans heavily on long-dated bonds. This means more sensitivity to interest rate moves and bigger drawdowns during shocks. LQD, while pricier at 0.14%, spreads risk across maturities and showed steadier returns over time. For South African investors, the USD/ZAR rate plays a role: a weaker rand boosts dollar bond returns locally but volatility in the rand can offset that. Given South Africa’s rising local rates and rand unpredictability, a steady, less volatile bond play like LQD fits better than the riskier SPLB—unless you’re convinced global rates will tumble fast. Standby liquidity and ability to stomach swings are key. This call might fall flat if the rand strengthens sharply or US rates plunge suddenly, lifting SPLB’s value. this is just our opinion and not financial advice
Prefer a cautious buy in LQD to balance yield with risk, and avoid SPLB unless you’re comfortable with big swings betting on falling US rates.
- LQD
- SPLB
- USD/ZAR
- US interest rates may fall sharply, boosting SPLB
- Unexpected rand strength reducing dollar bond returns
6/10
The article compares two investment-grade corporate bond ETFs: iShares' LQD and State Street's SPLB. SPLB offers lower fees (0.04% vs 0.14%) and higher yields (6.0% vs 4.9%), but carries higher volatility and greater downside risk due to its long-duration focus. LQD provides broader maturity exposure, lower volatility, and better long-term returns despite higher costs. For most long-term investors, LQD is recommended as the more dependable choice, while SPLB suits those betting on falling interest rates.
Our take is based on reporting first published by The Motley Fool.