Why Bond ETFs are All the Rage

April 23rd at 11:00am by John Spence

Bond exchange traded funds have surged in popularity in recent years and providers continue to roll out new fixed-income products designed to appeal to investors trying to boost yield in their portfolios.

Since 2009, the number of bond ETFs has risen from 52 to 191, with more products on tap, according to a recent Bloomberg News story.

At the end of March, there was $202.8 billion invested in U.S.-listed fixed-income exchange traded products, according to BlackRock. Corporate bond ETFs tracking investment grade and high-yield debt have been big sellers in recent months.

However, inflation and the threat of rising interest rates are among the risks for bond ETF investors. In response, some investors are looking at ETFs tracking bonds with shorter durations, and inflation-protected securities. [Special Report: Navigating Higher Rates with Bond ETFs]

“My clients need some bond income,” said financial planner Theodore Feight of Creative Financial Design, in the Bloomberg article. “However, I have told them that at the first sign of inflation, we may be selling any bonds we have.”

Investors concerned about rising interest rates are taking a closer look at ETFs that track corporate floating rate bonds. [Best ETFs for Floating Rate Bonds]

The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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