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Rethinking the U.S. Investment-Grade Corporate Bond Market Explore how an innovative new measure of S&P 500® debt is redefining the IG bond market.
BY Jason Giordano

Designed to track the largest and most frequently traded high-quality bonds issued by the well-known companies in the iconic S&P 500®, the S&P 500/MarketAxess Investment Grade Corporate Bond Index provides a new way to look at the U.S. investment-grade corporate bond market.


EXECUTIVE SUMMARY


• The S&P 500/MarketAxess Investment Grade Corporate Bond Index consists of high-quality issuers from the S&P 500; companies with global revenue streams, strong balance sheets, and a demonstrated capacity to service debt payments.

• It seeks to track the largest-issued bonds by size—these issues tend to trade in larger volume and with higher frequency, hence offering greater depth of liquidity.

• The index offers a more efficient way to view the broader U.S. investment-grade corporate bond market by tracking fewer bonds while achieving similar or better performance than the benchmark.


EXPANSION OF U.S. CORPORATE CREDIT


The accommodative conditions created by low interest rates and strong investor demand have resulted in an explosive expansion of corporate credit since the financial crisis. Over the 10-year period beginning Dec. 31, 2007, the amount of U.S. corporate debt outstanding increased by over USD 4 trillion. U.S. companies have tapped the bond markets for a number of purposes: efficient capital management (e.g., refinancings, share buybacks, dividends, etc.), increased capital expenditure (R&D, fixed assets, etc.), and to fund merger and acquisition activity. S&P 500 companies have been at the forefront of this expansion and were responsible for approximately 70% of the increase in outstanding corporate debt over the period studied (see Exhibit 3).

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