Tape watchers and daily chartists could have a field day on some of the out of the ordinary intraday trading activity we have seen this week in certain ETFs, particularly in the Fixed Income segment, affecting High Yield Corporates (HYLD, JNK) and even some Treasury linked ETFs like UST for example.

It has simply consisted of notable price dislocation and disagreement in the market place at times, potentially sloppy at times as well and in some isolated cases with “head for the exits” aggressive trading in certain fixed income products.

There have been more than a handful of notable short term deviations from the ETF’s trading price versus where one would value the fund’s “NAV” but then again this would not be the first time we have seen such “tells” materialize in the market in times of short term macro/global distress (Russia/Ukraine, Puerto Rico, Argentina, Portugal, etc.).

Dislocations like this also provide managers and institutions whom may be on the sidelines with lower than optimal allocations to fixed income the opportunity to take long positions, so in short, disarray often creates opportunity.

We do recall late last week an analyst call coming out of Goldman Sachs that in a nutshell expressed concern with a fixed income sell-off leading to equity market weakness, which has absolutely materialized this week and in short order. With massive assets in the largest Bond ETFs (BND $21 bln, AGG $18 bln, LQD ($17 bln), BSV ($14 bln), TIP ($13 bln), HYG ($12 bln), CSJ ($11.8 bln), JNK ($9.2 bln) and the list goes on. In fact, the roster is so deep in the broad “Fixed Income” ETP category that a total of forty one ETPs that have greater than $1 billion in assets under management, so anytime the markets receive a jolt of volatility or potential dislocations, you can expect flows to occur as asset managers try to navigate from one segment to another within the bond markets via said ETFs.

Since the realm of Fixed Income ETFs can be quite daunting, with 269 listed ETPs in the U.S. landscape currently targeting areas as different as U.S. Treasuries and Emerging Markets corporate bonds, numerous items need to be taken into consideration outside of simple price/yield analysis when determining where and when allocations should and will occur.

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