Because of how they’re structured, ETF prices will always vary slightly from their indicated net asset value (NAV), but the widening seen in bond funds really came as market volatility spiked in September when Lehman Brothers failed.
As more control comes into the markets, we’ll begin to see greater liquidity and the discount to NAV gap will ulimtately close. But it doesn’t mean that the value of the bonds can’t continue to fall.
Graphic courtesy of Investor’s Business Daily.