In anticipation of last week’s interest rate increase, a spike in yields led to a record $58 billion traded in bond ETFs, according to ETF research firm VettaFi. The bulk of this trading was in the secondary market between stock sellers and purchasers. This was especially true in high-yield corporate bond ETFs. This is due to high-yield bonds typically being less sensitive to interest rates compared with Treasuries. While high-yield bonds carry higher credit risk, investors are seeking the greater return potential. The highest traded ETF was the iShares iBoxx High Yield Corporate Bond ETF (HYG), which saw $9 billion in trades. This increase in trading in fixed income ETFs has been at the expense of fixed income mutual funds, which are seeing strong outflows. In the current market environment, where many assets are down, high-fee mutual funds are seen as less attractive than low-cost ETFs. 

Finsum: Ahead of last week’s Fed announcement, a spike in yields resulted in a record trade in high yield bond ETFs at the expense of fixed income mutual funds.