“The value of corporate securities held by the five-largest junk ETFs almost doubled in the past year to a record $31.4 billion, while the net amount of protection bought or sold on the debt using the two current credit-default swaps indexes declined 3%to $35 billion,” Bloomberg reports.
The ETFs are growing at an average 5.2% monthly pace this year, which would put assets at more than $36.5 billion by year-end, according to the article.
“Product innovation is often the answer to regulatory change and I don’t think it’s any coincidence that we’ve seen this explosion of interest in fixed-income ETFs just at the point at which CDS as a product and asset class comes under pressure,” Will Rhode, director of fixed-income at research firm Tabb Group, told Bloomberg News.
iShares iBoxx High Yield Corporate Bond
Full disclosure: Tom Lydon’s clients own HYG and JNK.