BlackRock Corporate Bond ETF Plunges Most in Almost Two Years

A $21 billion BlackRock Inc. (BLK) exchange-traded fund that owns investment-grade corporate bonds plunged the most in almost two years after the Federal Reserve signaled it may slow unprecedented stimulus supporting the market.

The iShares iBoxx Investment Grade Corporate Bond ETF (LQD) dropped 1.4 percent to $114.72, the biggest decline since August 2011. Investors have redeemed about $3.4 billion of the fund’s shares this year, data compiled by Bloomberg show.

The central bank may “moderate” the pace of its buying later this year and end the purchases around the middle of 2014 if data on economic growth is “broadly consistent” with its forecast, Fed Chairman Ben S. Bernanke said at a news conference today. Fed policy makers said in a statement today that risks to the economy have decreased.

Investors are cooling enthusiasm for the highest-rated debt as they prepare for a pullback from stimulus efforts that have pumped more than $2.5 trillion into the financial system since 2008. Yields on 10-year U.S. Treasuries, a benchmark for corporate debt, climbed 17 basis points to 2.35 percent as of 4:45 p.m. in New York, the highest level since March 2012.

ETFs, with shares that trade like stocks, allow investors from retirees to hedge funds to slip in and out of the bond market quicker than investments in the actual debt, which typically trades off exchanges in privately negotiated transactions.

Photographer: Scott Eells/Bloomberg

Pedestrians walking with umbrellas pass by taxi in front of BlackRock Inc. offices in New York, U.S. Close

Pedestrians walking with umbrellas pass by taxi in front of BlackRock Inc. offices in New York, U.S.

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Photographer: Scott Eells/Bloomberg

Pedestrians walking with umbrellas pass by taxi in front of BlackRock Inc. offices in New York, U.S.

Since BlackRock’s fund was created as the first fixed-income ETF in 2002, the U.S. debt funds have amassed $249.3 billion of assets, according to data from State Street Corp. (STT)

To contact the reporter on this story: Lisa Abramowicz in New York at labramowicz@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net

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