Corporate Bonds Face Shifting Dynamics: Which ETF Offers Better Long-Term Value?

The corporate bond market continues to attract yield-seeking investors, and two ETF heavyweights dominate the landscape for broad exposure: the State Street SPDR Portfolio Long Term Corporate Bond ETF (SPLB) and the iShares iBoxx Investment Grade Corporate Bond ETF (LQD). Recent corporate bond news highlights an ongoing tension between cost efficiency and performance resilience, making the choice between these funds increasingly relevant for fixed-income portfolios.

Fee Economics and Income Generation: Where SPLB Pulls Ahead

When it comes to cost, SPLB delivers a compelling case. Its expense ratio of just 0.04% undercuts LQD’s 0.14% by a meaningful margin—a difference that compounds significantly over decades of investing. For a $100,000 position, SPLB saves $100 annually compared to LQD, a small but tangible advantage for cost-conscious investors.

The income story tilts similarly in SPLB’s favor. As of February 2026, SPLB’s dividend yield sits at 5.2%, compared to LQD’s 4.34%—a 86-basis-point advantage that appeals directly to investors prioritizing current income from their corporate bond allocation. This higher yield stems from SPLB’s strategic focus: the fund concentrates exclusively on longer-maturity corporate bonds (10 years or beyond), a profile that typically commands premium yields in exchange for greater interest-rate sensitivity.

LQD, meanwhile, manages a substantially larger asset base at $33.17 billion versus SPLB’s $1.1 billion, a size advantage that sometimes translates to tighter trading spreads and greater liquidity for institutional investors.

Performance Reality: How Interest Rate Movements Impact Each Fund

The performance picture grows more complicated. Over the past five years, a $1,000 investment in SPLB would have grown to just $686.55, while the same amount in LQD would have reached $801.52—a $115 difference that reflects LQD’s superior resilience. This gap widens when examining volatility. SPLB experienced a maximum five-year drawdown of 23.31%, nearly 9 percentage points deeper than LQD’s 14.7% decline.

The culprit? Duration risk. SPLB’s long-maturity focus creates a bond portfolio with extended duration, meaning the fund’s net asset value swings more violently when interest rates shift. During recent periods of rising rates—particularly 2022 through mid-2024—this sensitivity worked against SPLB shareholders. LQD’s broader maturity spectrum, by contrast, provided a smoother ride through the same turbulent periods.

Portfolio Construction: Different Bets on Corporate Debt

The structural differences between these funds reveal their distinct approaches. SPLB’s 2,953 holdings concentrate on corporate bonds maturing 10 years or longer, resulting in an average fund duration of 16.8 years. Its largest positions include Meta Platforms’ senior unsecured notes (5.75% coupon due 2065), Anheuser Busch InBev guaranteed bonds (4.9% due 2046), and CVS Health senior unsecured debt (5.05% due 2048).

LQD casts a wider net across 3,002 holdings spanning all investment-grade maturities. Approximately 22.3% of LQD’s portfolio sits in the three-to-five-year maturity band, while 16.6% occupies the five-to-seven-year range—maturities that SPLB explicitly excludes. This diversification of maturity profiles has historically cushioned LQD against sharp rate movements, evidenced by its lower beta of 1.4 compared to SPLB’s 2.1 (beta measures volatility relative to the broader market).

The Trade-Off Framework: Cost Versus Stability

For investors, the decision hinges on personal circumstances and market outlook. Income-focused investors with long investment horizons and tolerance for volatility may find SPLB’s 0.04% expense ratio and 5.2% yield compelling enough to absorb the higher drawdown risk. The fee savings alone amount to $100,000 over a 50-year holding period on a million-dollar position.

Conversely, investors prioritizing capital preservation and steady returns may favor LQD’s more balanced maturity mix and demonstrated ability to weather recent corporate bond volatility. The fund’s 80+ basis-point performance advantage over five years reflects a meaningful edge when compounded across longer timeframes.

Both funds restrict holdings to investment-grade corporate bonds—securities rated as relatively low-default-risk by major credit rating agencies—making them suitable core building blocks for fixed-income exposure rather than speculative ventures.

Key Metrics at a Glance

SPLB emphasizes affordability and current income, boasting a 0.04% expense ratio and 5.2% yield, though it carries elevated volatility (2.1 beta) and a steeper 23.31% five-year drawdown. LQD prioritizes resilience and broader maturity diversity, delivering stronger long-term performance and lower volatility (1.4 beta), at the cost of higher fees (0.14%) and lower yield (4.34%).

The best choice depends on whether you value cost savings and yield today, or proven stability and compounded returns over market cycles. In the evolving corporate bond landscape, neither fund is objectively superior—each serves a distinct investor profile navigating the ongoing tension between expense efficiency and performance reliability.