American Century's Greenblath Talks Spring Corporate Bond Shifts

Why It Matters

The shift signals investors can capture higher yields by targeting long‑duration, high‑quality debt while avoiding over‑priced low‑grade issues, shaping portfolio construction in a higher‑rate environment.

Key Takeaways

• May’s long‑end corporate curve outperformed short end
• Single‑A and AA 30‑year bonds remain under‑priced
• High‑yield, BB‑C bonds underperformed dramatically
• Focus on bonds with positive optionality, avoid “rich beta.”
• KORP ETF delivered 5.5% return, 0.29% expense ratio

Pulse Analysis

The spring bond market has been reshaped by a prolonged period of elevated interest rates, prompting investors to re‑evaluate the risk‑return trade‑off across the corporate credit spectrum. As yields on Treasury securities climbed, the longer end of the corporate curve—particularly investment‑grade issues with tenors of 20 to 30 years—has generated relative price appreciation, outpacing shorter‑dated bonds. Jason Greenblath of American Century notes that this performance is tied to the perceived safety of high‑quality issuers, which have been able to maintain tighter spreads despite a “higher‑for‑longer” rate outlook.

At the same time, the market continues to exhibit pronounced mispricing in the upper‑tier segment of the credit market. Single‑A and AA 30‑year bonds, especially those issued by airlines and business‑development companies, are trading below their historical spread levels, offering a potential yield cushion for patient investors. Conversely, lower‑rated high‑yield credits—from BB down to triple‑C—have suffered steep price declines as cash‑flow pressures intensify under tighter financing conditions. Greenblath warns that oil price volatility, amplified by geopolitical uncertainty in the Middle East, adds an extra layer of inflation risk that could further strain weaker issuers.

Against this backdrop, Greenblath advocates a disciplined, optionality‑focused approach: sell when a bond reaches its fair‑value spread target and retain only securities with catalysts that could tighten spreads further. The American Century Diversified Corporate Bond ETF (KORP) embodies this philosophy, providing exposure to a curated basket of investment‑grade bonds while charging a modest 29‑basis‑point fee. With a 5.5% total return over the past year, KORP offers a practical vehicle for investors seeking to capture the upside of long‑duration, high‑quality credit without the operational complexity of assembling a bespoke bond ladder.