Displaying items by tag: ETFs

Thursday, 30 June 2022 05:30

Big Bear Year For Bond ETFs

Usually, bonds get a bump in bear markets and surging volatility but the largest bond funds have been taking a beating lately. AGG, TIP, HYG, TLT, and LQD are all down over double digits from the beginning of the year. Driving much of that change is a Fed-induced tightening cycle which on top of inflation is sending yields climbing and prices falling. This is all shaping up for the worst H1 in the history of the bond market according to Dow Jones Market Data. In addition to the increasing pressure due to monetary policy, there is real fear the US is already in a recession which could be the bane of the bond market moving forward. One of the growing concerns is that ETFs trade quickly and the less liquid underlying bonds could be left behind causing real market chaos.


Finsum: The liquidity difference in ETFs and bonds is becoming alarming and a full-blown panic with huge amounts of corporate debt could be a liability.

Published in Economy
Tuesday, 28 June 2022 05:57

Income Traders Increasingly Turn to ETFs

Fixed-income ETF volume is spiking as investors look to funds rather than individual bonds to fill their portfolio needs. The turnover rate spiked to $58 billion which topped the previous record from the start of the pandemic in March 2020. This is a huge signal that a generation of investors who have become familiar with equity ETFs are turning to the same vehicles for their bond market fix.  The most popular funds have been high yield funds such as HYG and JNK which saw $9 billion and $4 billion in trades respectively. Fixed income investors have said that the hyperactive market with daily trading presents an advantage from a price discovery standpoint as compared to individual bonds which might not even see trading on any given day. Undoubtedly, market turmoil is contributing to the high acquisition of bond ETFs.


Finsum: Bond demand is skyrocketing and they are returning to portfolios at a very high rate. 

Published in Economy
Tuesday, 21 June 2022 15:07

Active Muni Bond ETFs Prove Popular

Investors are flocking to active ETFs in search of more market alpha amid the volatility. Pickers' performance has been especially effective in high volatility, and Muni bonds are another great option. Outflows have been consistent from Muni bonds since 2021 but that tide is starting to turn as yields rise and investors need an inflation cushion. Moreover, their high credit scores and tax advantages are extremely attractive to high net worth investors. One option is Avantis Core Municipal Fixed Income ETF (AVMU) which is an active muni investment fund. The fund has a pretty low expense ratio (0.15%), and they also believe it can outperform in a rising yield environment.


Finsum: Yields are beginning to look more attractive, but remember how much of that is built-in inflation.

Published in Economy
Wednesday, 15 June 2022 05:20

Ultra Niche ETFs Trending

Active ESG Bond ETFs may be a mouthful, but they are also where the market is headed. Most passive bond ETFs have been left in the dust tracking big indexes and getting killed on rising rates with too much exposure to government bonds. Active bond funds have a wider array of maneuvers, and can act more swiftly in order to keep pace with the market. The case for active equity is more difficult, but in macro environments and when so many investors are moving rapidly into ESG fund managers have an edge at selecting bonds that will outperform. The additional exposure to ESG is a subsector that has outperformed market benchmarks because of the rising demand from a new wave of investors. Additionally fund managers seem to outperform within ESG as well because they have a more discerning eye.


Finsum: There has been a second coming for active ETFs and that will only continue if the Fed has to stomp on the brakes.

Published in Economy
Thursday, 26 May 2022 03:03

Look Out for Big Bond ETF Moves

There has been a sharp uptick in the high-value bond ETF trades in the last 12-months which most investors are attributing to activity from large institutional investors. Transactions are up as much as 36% on some platforms from the previous year. This has been part of a longer more ongoing trend that has been successful for many bond funds. Since the GFC, investors have questioned the resiliency of these funds to economic downturns, but regulators and investors alike are pleased with their performance in the covid pandemic. Just as important to this is the support from the Fed and Fiscal policy to the economy. Stepping in with bond relief has helped these ETFs. Finally, the increase in investment in bond ETFs has actually led to tighter underlying spreads in bond markets themselves and reflects better liquidity.


Finsum: Many believe that over-investment in index funds could be disruptive to equity volatility over time, but it appears to be stabilizing bond spreads.

Published in Bonds: IG
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