U.S. Treasurys Lose Final AAA Rating: Fixed Income ETF Alternatives to Watch

iShares Aaa - A Rated Corporate Bond ETF

QLTA

+0.01%

One viable alternative to U.S. Treasurys is to hunt for high-quality corporate bonds, accepting some credit and liquidity risk in exchange for a yield pickup.

A solid candidate for this approach is the iShares Aaa – A Rated Corporate Bond ETF

, which charges a modest 0.15% expense ratio to track the Bloomberg U.S. Corporate Aaa - A Capped Index.

Sector-wise, QLTA is dominated by financial issuers, followed by consumer staples and tech companies. This is typical for investment-grade corporate bond funds, as the bulge bracket banks are among the most active issuers of long-dated, high-quality debt, while stable cash-generating firms like Procter & Gamble and Coca-Cola add to the mix.

The fund has an intermediate duration of 6.67 years, with most of its exposure in the 3–5, 7–10, and 20+ year maturity ranges. That means you get a decent balance of interest rate sensitivity and income.

As for credit quality, QLTA is top tier: 83.07% of its holdings are A-rated, 14.09% AA, and 2.11% AAA, meaning it's technically more creditworthy than the U.S. government, thanks to bonds issued by Microsoft.

Investors currently receive a 4.94% 30-day SEC yield, but keep in mind that corporate bond income is fully taxable at ordinary income rates, unlike Treasurys, which are exempt from state and local taxes. That can reduce after-tax returns, particularly for high earners investing in taxable accounts.

SPDR Bloomberg International Treasury Bond ETF

BWX

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If you'd rather stick with government-issued bonds, another route is to look abroad, particularly to sovereign debt from developed markets with investment-grade credit ratings.

For this role, I like the SPDR Bloomberg International Treasury Bond ETF

, which tracks the Bloomberg Global Treasury ex-US Capped Index.

This ETF focuses on fixed-rate, local-currency sovereign debt, meaning it holds government bonds issued in their home currencies, not in U.S. dollars. To qualify for inclusion, bonds must have a minimum of one year to maturity and be rated investment grade.

Top countries represented include Japan, France, the United Kingdom, and South Korea. In total, BWX holds over 1,600 bond issues, with 20.89% rated AAA, although the largest individual rating bucket is A1.

The fund’s maturity profile skews toward the 3–5 year and 7–10 year ranges, with a weighted average duration of 7.74 years, giving it moderate interest rate sensitivity.

Investors can currently expect a 2.58% 30-day SEC yield, and the expense ratio comes in at 0.35%. BWX offers a way to maintain sovereign bond exposure while diversifying away from U.S. political risk.

Please note that this article reflects the author’s personal views and does not represent the opinions of the publication or its affiliates. It is for informational purposes only and does not constitute investment advice. It is essential to seek guidance from a registered financial professional before making any investment decisions.