According to research from data analytics company Coalition Greenwich, the influence of some corporate bond ETFs on their underlying holdings has increased, as the electronification of fixed-income trading has created an upheaval in how bonds are traded. The firm found that the trading volumes of 12 of the largest corporate bond ETFs rose from 18% of the turnover in their constituent investment grade and high-yield bonds in 2021 to 23% in 2022. In addition, the proportion was even more marked when Coalition Greenwich narrowed its focus to the five high-yield ETFs in its study. In this case, it found average daily notional volume soared from 30.5% of the underlying bonds in 2021 to 47.4%. What this means is that ETFs accounted for nearly half of the daily traded value of the underlying bonds. Kevin McPartland, head of market structure and technology research at Coalition Greenwich stated, “In the last three years everything has changed, all bond market participants now traded at least some of their volume electronically, which was transforming the market.” The increasing share of volume traded is an indication of a revolution in which corporate bonds are traded. Fixed-income ETFs have helped to increase the electronification of the corporate bond market, which has resulted in better price discovery, liquidity, and tighter spreads.
Finsum:According to research from data analytics company Coalition Greenwich,the trading volumes of some of the largest corporate bond ETFs are rising and accounting for a higher daily traded value of the underlying bonds.