Bond investors are gravitating to the exchange traded fund market, in search of higher yields. This sector of the ETF market is growing due to the transparency, liquidity and simplicity.
“It’s another way for investors to access the high-yield market. It’s less about mutual funds versus ETFs. We’re attracting a lot of new investors. It’s actually increasing the size of the fund market,” Matthew Tucker of BlackRock said on Invesment News. [ETF Chart of the Day: U.S. Treasury Bonds]
Bond ETFs are an instrument that allows individual investors the access to speculate on debt ranked below investment grade, without owning bonds, reports Bloomberg on Investment News.
“Unlike individual bonds, bond ETFs trade on an exchange, like the NYSE. The exchange is a centralized trading system that connects buyers and sellers, and prices are quoted continually throughout the trading day. An order book lists buy and sell orders, allowing investors to see in real time the price and demand for an ETF. This transparency gives participants view into how the overall market is valuing an ETF, which in turn can help to narrow spreads and lower transaction costs for investors,” Matthew Tucker wrote on Seeking Alpha. [ETF Spotlight: High Yield Bonds]
“ETFs are helping to democratize the entire fixed-income market,” Tucker said. [iShares Readies Active Fixed-Income ETFs]
Tisha Guerrero contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, 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.