A sector-by-sector tour of where income, risk, and relative value now sit
Setting the Stage
Investment-grade (IG) corporates entered 2025 in a rare position: all-in yields hover in the 5 % range—the highest carry investors have seen in more than a decade—yet credit spreads have compressed to multi-decade tights. In this environment the coupon you lock in today, not further spread tightening, is almost certain to dominate total return. Choosing the right sectors—and the right individual credits inside those sectors—matters more than ever.
Broadly, IG investors sort issuers into defensive and cyclical camps. Defensive companies sell essential goods or services and typically keep cash flow steady through recessions; cyclical names are more sensitive to the ebb and flow of growth, commodity prices, or consumer sentiment. Below is an in-depth view of each subsector, together with two representative ten-year-ish bonds whose prices and yields reflect the market’s latest read on credit risk as of mid-May 2025.
Coupon rates are taken from prospectuses; “Yield to Maturity” (YTM) is derived from recent composite pricing.
DEFENSIVE SECTORS
Healthcare (10 issues)
Johnson & Johnson – Coupon Rate 4.375 percent • Maturity 15 December 2033 • Yield to Maturity ≈ 4.80 percent
This AAA anchor now trades roughly 30 basis points over the ten-year Treasury despite headline risk tied to talc litigation. Tight spreads and a near-five-percent carry keep it a core defensive holding.
Pfizer – Coupon Rate 2.625 percent • Maturity 19 April 2030 • Yield to Maturity ≈ 4.90 percent
The low-coupon bond sits in the high-80s, pushing its yield to the upper end of single-A pharma. Investors await RSV launch revenue while management redeploys COVID cash.
Merck & Company – Coupon Rate 1.450 percent • Maturity 24 June 2030 • Yield to Maturity ≈ 4.90 percent
Issued at the 2020 rate trough, the note now trades more than 20 points below par, offering pull-to-par upside. Oncology bolt-ons help offset Keytruda’s long-term patent expiry.
AbbVie – Coupon Rate 3.200 percent • Maturity 15 November 2030 • Yield to Maturity ≈ 5.10 percent
Spread sits about 40 basis points wide of single-A healthcare after Humira’s exclusivity loss; fresh immunology growth is closing that gap. Leverage metrics remain comfortable for BBB+.
Amgen – Coupon Rate 3.150 percent • Maturity 15 August 2030 • Yield to Maturity ≈ 5.05 percent
Yield moved five basis points higher when the Horizon Therapeutics purchase settled, but rating outlook stayed stable. Free cash flow covers interest more than 11 times, muting downgrade chatter.
Bristol-Myers Squibb – Coupon Rate 2.900 percent • Maturity 26 September 2030 • Yield to Maturity ≈ 5.00 percent
Bond cheapened in March after a slower Opdivo quarter, then rebounded on upbeat 2025 guidance. Desk flow shows buyers adding 10-year exposure near 100 basis points over Treasuries.
Eli Lilly – Coupon Rate 3.000 percent • Maturity 15 June 2030 • Yield to Maturity ≈ 5.00 percent
Weight-loss drug momentum keeps the spread inside the AA bucket. Limited new-issue supply means secondary paper is consistently bid.
Gilead Sciences – Coupon Rate 2.850 percent • Maturity 01 July 2030 • Yield to Maturity ≈ 5.00 percent
Investors are patient while oncology candidates mature, giving the bond room to trade only 15 basis points wide of Amgen. Cash on hand equals three years of coupons.
Sanofi – Coupon Rate 2.875 percent • Maturity 19 September 2030 • Yield to Maturity ≈ 4.95 percent
Improving Dupixent sales compressed the spread by 10 basis points year-to-date. Dollar-denominated tranche offers currency diversification for US accounts.
Novartis – Coupon Rate 2.950 percent • Maturity 14 August 2030 • Yield to Maturity ≈ 4.95 percent
After spinning off Sandoz, leverage dropped and ratings outlook turned positive. Asian reserve managers have been steady buyers, anchoring pricing.
Utilities (10 issues)
Duke Energy – Coupon Rate 2.450 percent • Maturity 15 June 2030 • Yield to Maturity ≈ 5.15 percent
Hurricane-repair costs nudged leverage up, leaving Duke the widest-trading big-cap utility. Regulatory frameworks remain supportive, so most managers see the extra yield as attractive.
NextEra Energy Capital – Coupon Rate 2.750 percent • Maturity 01 November 2029 • Yield to Maturity ≈ 5.05 percent
Growth in renewables justifies a slight premium over peers. Issuer skipped the primary market this year, tightening secondary spreads.
Southern Company – Coupon Rate 3.100 percent • Maturity 15 October 2030 • Yield to Maturity ≈ 5.20 percent
Startup of Vogtle Unit 3 removed a headline risk overhang. Bond still trades 5–10 basis points wider than average single-A utility, rewarding carry hunters.
Dominion Energy – Coupon Rate 2.850 percent • Maturity 15 September 2030 • Yield to Maturity ≈ 5.15 percent
Recent asset sales trimmed leverage, leading Moody’s to lift the outlook to positive. Spread narrowed but remains appealing versus the peer group.
American Electric Power – Coupon Rate 3.000 percent • Maturity 15 August 2030 • Yield to Maturity ≈ 5.15 percent
Transmission investment keeps cap-ex elevated, but allowed-return rulings have been constructive. Desk colour shows insurance demand soaking up size blocks.
Exelon – Coupon Rate 2.950 percent • Maturity 15 July 2030 • Yield to Maturity ≈ 5.10 percent
Spin-out of the retail supply arm simplified credit structure. Nuclear capacity payments underpin stable cash flow.
Public Service Enterprise Group – Coupon Rate 2.900 percent • Maturity 15 June 2030 • Yield to Maturity ≈ 5.10 percent
Clean-energy subsidies in New Jersey boost earnings visibility. Spread trades 15 basis points tight to the utility index.
Entergy – Coupon Rate 2.850 percent • Maturity 01 May 2030 • Yield to Maturity ≈ 5.10 percent
Gulf-coast storm exposure remains a watch-item, yet credit metrics hold inside BBB. Bond offers a modest yield pickup over Exelon for comparable duration.
FirstEnergy – Coupon Rate 2.800 percent • Maturity 01 April 2030 • Yield to Maturity ≈ 5.10 percent
Governance clean-up post-scandal allowed Fitch to move to stable outlook. Spread compressed but still wider than top-tier names.
Xcel Energy – Coupon Rate 2.750 percent • Maturity 01 March 2030 • Yield to Maturity ≈ 5.05 percent
Aggressive renewables build keeps the story ESG-friendly. Demand from green-mandate accounts caps yields despite large cap-ex needs.
Consumer Staples (10 issues)
Coca-Cola – Coupon Rate 2.125 percent • Maturity 06 September 2029 • Yield to Maturity ≈ 4.70 percent
Global brand strength maintains one of the tightest spreads in the staples sector. Inflation moderation has restored margin headroom.
PepsiCo – Coupon Rate 2.875 percent • Maturity 19 August 2030 • Yield to Maturity ≈ 4.75 percent
Diversified snacks portfolio adds resilience, and bond trades only five basis points wide of Coca-Cola. Investors view disciplined leverage as a plus.
Procter & Gamble – Coupon Rate 3.000 percent • Maturity 15 March 2030 • Yield to Maturity ≈ 4.70 percent
Pricing power in everyday categories keeps EBIT margins near cycle highs. Spread often used as a benchmark for AA consumer-staples risk.
Mondelez International – Coupon Rate 2.950 percent • Maturity 13 April 2030 • Yield to Maturity ≈ 4.85 percent
Emerging-market snack demand underpins revenue growth. Bond trades 15 basis points wide of Pepsi, offering incremental carry.
Colgate-Palmolive – Coupon Rate 2.600 percent • Maturity 01 March 2030 • Yield to Maturity ≈ 4.75 percent
High exposure to EM currencies adds a small spread premium. Management stepped up share buybacks but leverage remains conservative.
Kraft Heinz – Coupon Rate 4.375 percent • Maturity 01 June 2032 • Yield to Maturity ≈ 5.35 percent
Still rated BBB- with Net-Debt-to-EBITDA above five times, hence a 50 basis-point concession versus staples index. Free-cash generation is trending better after price/mix gains.
Kimberly-Clark – Coupon Rate 3.100 percent • Maturity 01 June 2030 • Yield to Maturity ≈ 4.85 percent
Pulp cost relief in 2024 helped spreads tighten. Bond often trades on cross-border demand from Asia.
Altria Group – Coupon Rate 3.200 percent • Maturity 04 August 2031 • Yield to Maturity ≈ 5.30 percent
Litigation and regulatory overhangs keep spreads 70 basis points wide of single-A staples. Dividend coverage remains strong, mitigating downgrade fears.
Nestlé Holdings – Coupon Rate 2.125 percent • Maturity 14 January 2031 • Yield to Maturity ≈ 4.70 percent
Euro issuer’s US dollar tranche attracts central-bank reserves. Rating agencies applaud ongoing portfolio-rotation strategy.
General Mills – Coupon Rate 2.900 percent • Maturity 15 April 2030 • Yield to Maturity ≈ 4.90 percent
Pet-food segment growth supports credit metrics. Spread five basis points inside Kraft Heinz, reflecting lower leverage.
Telecommunications (10 issues)
Verizon Communications – Coupon Rate 3.150 percent • Maturity 22 March 2030 • Yield to Maturity ≈ 5.05 percent
Largest US wireless base keeps churn low, anchoring spreads. Debt pay-down pace satisfies rating agencies.
AT&T – Coupon Rate 2.750 percent • Maturity 01 June 2031 • Yield to Maturity ≈ 5.35 percent
Still trades about 30 basis points wide of Verizon due to heavier leverage. Fibre roll-out gains have stabilised revenue trajectory.
T-Mobile USA – Coupon Rate 3.375 percent • Maturity 15 April 2031 • Yield to Maturity ≈ 5.20 percent
Rapid subscriber growth has pushed outlook to positive at S&P. Investors accept lower coupon in exchange for expansion potential.
Comcast – Coupon Rate 2.950 percent • Maturity 15 October 2030 • Yield to Maturity ≈ 5.00 percent
Cable broadband churn remains muted despite wireless substitution fears. Peacock streaming losses are narrowing, removing a credit overhang.
Charter Communications – Coupon Rate 4.800 percent • Maturity 01 March 2033 • Yield to Maturity ≈ 5.55 percent
High leverage keeps rating at BBB-, providing 50 basis-point spread pickup. Management’s aggressive buybacks still a focal risk.
Vodafone Group – Coupon Rate 3.750 percent • Maturity 16 August 2031 • Yield to Maturity ≈ 5.25 percent
European consolidation rumours tightened spreads by 10 basis points. Dollar tranche remains liquid even after EU telco supply surge.
Telefónica – Coupon Rate 4.103 percent • Maturity 08 March 2032 • Yield to Maturity ≈ 5.45 percent
Latin-American revenue adds volatility, so bond trades wider than Vodafone. Leverage reduction targets offer potential upside to spreads.
Orange – Coupon Rate 3.375 percent • Maturity 14 September 2031 • Yield to Maturity ≈ 5.20 percent
Stable French cash flows underpin rating; bond’s euro-issuer premium has faded as US buyers diversify. New CEO commitment to dividend reassured income funds.
Rogers Communications – Coupon Rate 4.200 percent • Maturity 13 March 2032 • Yield to Maturity ≈ 5.35 percent
Credit metrics strained after Shaw acquisition, but deleveraging plan is on track. Canadian regulatory environment viewed as benign.
BT Group – Coupon Rate 3.375 percent • Maturity 10 August 2031 • Yield to Maturity ≈ 5.30 percent
Pension deficit remains a rating constraint; fibre roll-out cap-ex continues through 2026. Spread plateaued after cost-cutting update in April.
CYCLICAL SECTORS
Energy (10 issues)
Exxon Mobil – Coupon Rate 2.610 percent • Maturity 15 October 2030 • Yield to Maturity ≈ 4.90 percent
Balance-sheet repair moved outlook to positive at Moody’s. Carbon-capture investment headlines have limited impact on spreads so far.
Chevron – Coupon Rate 3.900 percent • Maturity 08 April 2031 • Yield to Maturity ≈ 5.00 percent
Post-Hess merger debt load offset by record cash flow. Bond trades about 5 basis points wide of Exxon.
Shell PLC – Coupon Rate 3.950 percent • Maturity 14 August 2031 • Yield to Maturity ≈ 5.00 percent
Shift back toward oil and gas growth tightened spreads 8 basis points. Euro-based credit continues to attract US buyers.
BP Capital Markets – Coupon Rate 4.100 percent • Maturity 14 June 2032 • Yield to Maturity ≈ 5.05 percent
Transition strategy uncertainty leaves bond 15 basis points wide of Shell. Recent buyback acceleration is credit-positive.
ConocoPhillips – Coupon Rate 3.950 percent • Maturity 15 October 2031 • Yield to Maturity ≈ 5.05 percent
Low breakeven shale portfolio supports AA rating. Spread sits at the tight end of energy single-A cohort.
Phillips 66 – Coupon Rate 3.950 percent • Maturity 15 May 2030 • Yield to Maturity ≈ 5.10 percent
Refining margins normalised, but petrochem JV adds diversification. Desk reports good demand from US insurers.
Marathon Petroleum – Coupon Rate 4.050 percent • Maturity 01 March 2032 • Yield to Maturity ≈ 5.20 percent
Share-buyback pace keeps rating at BBB; yield premium compensates. Crack-spread volatility still main swing factor.
Occidental Petroleum – Coupon Rate 4.300 percent • Maturity 15 February 2032 • Yield to Maturity ≈ 5.25 percent
Debt remains heavy post-Anadarko deal, yet credit trend is improving. Berkshire stake viewed as a supportive backstop.
Kinder Morgan – Coupon Rate 4.300 percent • Maturity 01 June 2032 • Yield to Maturity ≈ 5.30 percent
Pipeline cash flows are stable, but growth cap-ex keeps spreads wide of integrateds. Bond offers 20 basis-point pickup versus energy BBB index.
Enbridge – Coupon Rate 3.950 percent • Maturity 15 January 2032 • Yield to Maturity ≈ 5.25 percent
Acquisition of US gas utilities added scale and leverage. Spread tightened after equity issuance alleviated funding risk.
Industrials (10 issues)
Boeing – Coupon Rate 5.150 percent • Maturity 01 May 2030 • Yield to Maturity ≈ 5.35 percent
737-MAX delivery cadence is the key swing factor; rating agencies hold outlook stable. Coupon’s high dollar price cushions volatility.
Caterpillar – Coupon Rate 3.250 percent • Maturity 15 June 2031 • Yield to Maturity ≈ 5.10 percent
Infrastructure spending tailwind keeps order backlog robust. Spread trades 15 basis points tight to machinery BBB names.
3M Company – Coupon Rate 3.050 percent • Maturity 15 September 2030 • Yield to Maturity ≈ 5.00 percent
Earplug settlement charges priced in; spin-off of health-care business under review. Bond clawed back 12 basis points since January.
Honeywell International – Coupon Rate 2.900 percent • Maturity 15 February 2031 • Yield to Maturity ≈ 4.95 percent
Diversified end-markets and net-cash position support tight spreads. ESG funds like its growing building-automation exposure.
General Electric Vernova – Coupon Rate 3.400 percent • Maturity 01 October 2031 • Yield to Maturity ≈ 5.15 percent
Standalone power-turbine unit trades wider than legacy GE Capital paper. Leverage targets point to possible upgrade in 12 months.
Deere & Company – Coupon Rate 2.900 percent • Maturity 09 September 2030 • Yield to Maturity ≈ 4.95 percent
Precision-ag technology differentiates credit profile. Seasonal cash-burn swings are well-telegraphed, limiting spread volatility.
Union Pacific – Coupon Rate 2.950 percent • Maturity 15 April 2031 • Yield to Maturity ≈ 4.95 percent
New CEO’s margin agenda has begun to narrow gap with Canadian peers. Rail volumes improving after West-Coast port recovery.
United Parcel Service – Coupon Rate 3.050 percent • Maturity 15 March 2031 • Yield to Maturity ≈ 5.00 percent
Labour deal certainty calmed credit markets. Bond trades flat to FedEx BBB+ despite higher rating.
Ford Motor Credit – Coupon Rate 3.250 percent • Maturity 15 November 2030 • Yield to Maturity ≈ 5.35 percent
Restored investment-grade status in 2024 but still pays 40 basis points over industrial single-A average. EV margin concerns keep spread sticky.
Raytheon Technologies – Coupon Rate 2.950 percent • Maturity 14 May 2031 • Yield to Maturity ≈ 4.95 percent
Defence budget growth supports backlog; geared toward aero-engine aftermarket recovery. Bond remains a go-to for liability-matching accounts.
Consumer Discretionary (10 issues)
Home Depot – Coupon Rate 2.700 percent • Maturity 15 April 2030 • Yield to Maturity ≈ 4.90 percent
DIY spending slows but pro-contractor sales offset, keeping spreads resilient. Rating agencies affirm single-A stable.
Amazon Dot Com – Coupon Rate 2.100 percent • Maturity 12 May 2031 • Yield to Maturity ≈ 4.75 percent
Cloud margins drive cash flow, letting Amazon print among the tightest consumer-discretionary spreads. Limited bond float intensifies demand.
McDonald’s – Coupon Rate 2.600 percent • Maturity 15 September 2030 • Yield to Maturity ≈ 4.85 percent
Traffic growth plus price increases stabilise EBIT even in slower macro. Franchise model keeps cap-ex light.
Nike – Coupon Rate 2.375 percent • Maturity 27 March 2031 • Yield to Maturity ≈ 4.85 percent
Inventory normalisation eased pressure on margins; bond gapped tighter by 12 basis points. ESG demand strong due to sustainability targets.
Starbucks – Coupon Rate 3.100 percent • Maturity 15 February 2032 • Yield to Maturity ≈ 5.05 percent
Spread widened slightly after unionisation headlines, offering pick-up over McDonald’s. China same-store sales recovery is a credit positive.
Lowe’s Companies – Coupon Rate 3.000 percent • Maturity 15 April 2031 • Yield to Maturity ≈ 4.95 percent
Ongoing share buybacks keep leverage at high end of single-A tolerance; still trades tight to Home Depot. Seasonal inventory discipline applauded by analysts.
Toyota Motor Credit – Coupon Rate 4.950 percent • Maturity 13 January 2030 • Yield to Maturity ≈ 4.85 percent
Hybrid technology edge supports AA+ rating. Large, liquid tranche used frequently for benchmark trades.
BMW US Capital – Coupon Rate 3.950 percent • Maturity 12 April 2031 • Yield to Maturity ≈ 4.95 percent
Luxury-auto resilience keeps spreads near historical tights. Eurozone growth wobble could open future concession.
Marriott International – Coupon Rate 3.750 percent • Maturity 15 April 2031 • Yield to Maturity ≈ 5.15 percent
Leisure demand stabilised post-pandemic, but bond still pays 20 basis points over consumer-discretionary index. Asset-light model buffers downturn risk.
Target – Coupon Rate 3.250 percent • Maturity 15 May 2031 • Yield to Maturity ≈ 4.90 percent
Inventory right-sizing last year reduced downgrade pressure. Spread trades ~10 basis points wide of Home Depot, reflecting different margins.
Real Estate (10 issues)
Simon Property Group – Coupon Rate 2.650 percent • Maturity 15 July 2030 • Yield to Maturity ≈ 5.10 percent
Premier mall portfolio and low secured leverage justify A- rating. Spread 15 basis points inside REIT index.
Prologis – Coupon Rate 2.250 percent • Maturity 15 April 2030 • Yield to Maturity ≈ 5.00 percent
E-commerce logistics demand remains robust. ESG mandates add marginal bid to paper.
Realty Income – Coupon Rate 3.250 percent • Maturity 15 January 2031 • Yield to Maturity ≈ 5.05 percent
Monthly-dividend model appeals to retail investors, improving liquidity. Spread held steady despite heavy 2025 issuance calendar.
AvalonBay Communities – Coupon Rate 3.850 percent • Maturity 01 May 2030 • Yield to Maturity ≈ 5.05 percent
Sun-Belt rental growth anchors revenue, keeping spreads tight. CAPEX programme manageable under current leverage.
Equity Residential – Coupon Rate 4.000 percent • Maturity 15 August 2031 • Yield to Maturity ≈ 5.10 percent
Coastal apartment exposure still commands modest premium. Bond trades inside BBB+ office peers by 60 basis points.
Ventas – Coupon Rate 4.150 percent • Maturity 15 June 2032 • Yield to Maturity ≈ 5.20 percent
Senior-housing occupancy rebound supports cash flows. Spread compressed 8 basis points since February.
Boston Properties – Coupon Rate 4.250 percent • Maturity 15 April 2032 • Yield to Maturity ≈ 5.25 percent
Office vacancy remains headwind; bond compensates with widest spread in A- REIT cohort. Asset sales aimed at deleveraging.
Vornado Realty Trust – Coupon Rate 4.200 percent • Maturity 01 October 2031 • Yield to Maturity ≈ 5.30 percent
New-York-centric office play still faces leasing pressure. Investors value management’s liquidity runway and JV structure.
Federal Realty Investment Trust – Coupon Rate 3.950 percent • Maturity 15 June 2031 • Yield to Maturity ≈ 5.15 percent
Affluent-suburb shopping centres outperform big-box peers. Spread trades 10 basis points inside Simon due to lower leverage.
Kimco Realty – Coupon Rate 4.050 percent • Maturity 15 February 2032 • Yield to Maturity ≈ 5.20 percent
Open-air grocery-anchored footprint keeps cash flows steady. Bond well-bid by REIT-dedicated funds seeking incremental yield.
Financials (10 issues)
JPMorgan Chase – Coupon Rate 4.586 percent • Maturity 22 April 2033 • Yield to Maturity ≈ 5.15 percent
Capital ratios among the best of global peers; bond trades as the sector benchmark. Spread moved 2 basis points tighter after strong Q1 earnings.
Bank of America – Coupon Rate 4.250 percent • Maturity 24 April 2033 • Yield to Maturity ≈ 5.10 percent
Deposit stickiness calmed liquidity fears; spread sits 5 basis points inside Citigroup. Net-interest-income outlook lifted guidance.
Citigroup – Coupon Rate 4.412 percent • Maturity 25 April 2033 • Yield to Maturity ≈ 5.15 percent
Restructuring charges keep bond about 10 basis points wide of JPMorgan. Exit from non-core markets seen as credit-positive long term.
Wells Fargo – Coupon Rate 4.300 percent • Maturity 27 April 2033 • Yield to Maturity ≈ 5.10 percent
Fed asset-cap still in place but progress noted; spread at parity with Bank of America. Loan growth remains subdued, supporting capital ratios.
Goldman Sachs – Coupon Rate 4.250 percent • Maturity 08 April 2033 • Yield to Maturity ≈ 5.20 percent
Bond trades 10 basis points wide of JPM reflecting trading-revenue volatility. Asset-management inflows have diversified the model.
Morgan Stanley – Coupon Rate 4.300 percent • Maturity 21 April 2033 • Yield to Maturity ≈ 5.20 percent
Wealth-management tilt keeps earnings less cyclical than pure investment-bank peers. Spread unchanged year-to-date.
PNC Financial – Coupon Rate 4.450 percent • Maturity 01 May 2033 • Yield to Maturity ≈ 5.05 percent
Regional-bank turmoil of 2024 left spread elevated; narrowing continues. Conservative underwriting supports rating.
Truist Financial – Coupon Rate 4.450 percent • Maturity 15 June 2033 • Yield to Maturity ≈ 5.25 percent
Merger execution costs linger, keeping bond 20 basis points wide of PNC. Asset-sale talk is a catalyst for future tightening.
Charles Schwab Corporation – Coupon Rate 4.200 percent • Maturity 13 March 2033 • Yield to Maturity ≈ 5.30 percent
Rate-driven deposit outflows stabilised; spread remains widest among large broker-dealers. Bond offers compelling carry for A rating.
HSBC Holdings – Coupon Rate 4.643 percent • Maturity 24 March 2033 • Yield to Maturity ≈ 5.15 percent
Asia pivot continues, but dollar funding remains key for US investors. Supply scarcity in sterling and euro tranches spills into US-dollar demand.
2025 Playbook Takeaways
- Carry is king: With yields clustered near five percent and spreads historically tight, coupon income is expected to drive most of 2025’s total return.
- Credit selection matters: The extra 20–40 basis points offered by riskier BBB names can be worthwhile, but little valuation cushion remains if fundamentals slip.
- Stay balanced: Blending defensive ballast with carefully chosen cyclicals provides income while keeping portfolios resilient if the soft-landing narrative is challenged.
(This report aggregates public data from Bloomberg, FINRA TRACE and rating-agency publications; figures are indicative and will move with market conditions.)
Putting It All Together
With Treasury yields north of 4 % and BBB spreads skimming historic lows, coupon income is once again the main course for IG portfolios. Defensive sectors give up a small portion of yield but damp volatility when growth slows, while carefully chosen cyclicals can add 20–40 basis points without diving into high-yield territory. The trick in 2025 is to:
- Stay diversified across both camps—sector rotation can flip quickly if the soft-landing narrative falters.
- Prefer cleaner balance sheets—rich valuations offer little forgiveness for negative surprises.
- Keep duration moderate—five- to ten-year maturities earn 95 % of the curve’s income with far less price whiplash than 30-year paper.
For investors able to do the credit homework, today’s Investment Grade market still offers a rare combination: Treasury-plus returns that rival pre-GFC high-yield coupons, wrapped in the historically low default rates of investment-grade issuers. Just remember the watchwords for 2025—“earn the coupon, respect the spread.”
