Moreover, bonds ETFs can trade at a premium or discount to their net asset value. For instance, corporate debt ETFs were trading at a premium during the second half last year as investors were rushing into yield-generating assets but began trading at a discount this year as interest rates increased. Peter Sleep, senior portfolio manager at Seven Investment Management, points out that an unlucky investor could have bought at a maximum premium and sold at a maximum discount, incurring an even steeper loss.

Sleep, though, also notes that high-yield bond ETFs were trading at a slight discount during the height of the recent selloff.

“It proves the point that ETFs are helping to make an illiquid market more liquid,” Sleep said.

For more information on the bond market, visit our bond ETFs category.

Max Chen contributed to this article.