Bond liquidity concerns rose after investors started dumping fixed-income assets as benchmark 10-year Treasury yields rose 100 basis points from May. [Digging Deeper Into Bond ETF Pricing, Liquidity]
“For context, recent Federal Reserve Bank of New York research indicates that an investor or dealer liquidation of more than $250 million in corporate bonds in one day could begin to adversely affect bond prices,” Fitch analysts added.
Nevertheless, the ETF vehicle has helped bolster liquidity for investors interested in trading fixed-income assets, especially in high-yield corporate bonds.
“ETFs provide a mechanism for fixed income investors to trade more actively within the high-yield market, helping to compensate for the relatively lower liquidity in the underlying bond market,” Fitch said.
For more information on bonds, visit our bond ETFs category.
Max Chen contributed to this article.