Consequently, without enough bond securities to go around, investors may tap into ETF options instead.
“If times are good, ETFs can be more liquid than bonds because there is active secondary market trading, something which is lacking for bonds,” Christoph Fick, senior money manager at Pioneer Investments, said on The Globe and Mail.
Nevertheless, Fick warned of potential liquidity problems down the line, similar to what could happen in the U.S. as the Fed thinks about hiking interest rates. [Some Bond ETFs May Be Providing The Illusion Of Liquidity]
“But if everyone wants to get out of credit at the same time, owning the ETF won’t be an advantage,” Fick added.
For more information on the fixed-income market, visit our bond ETFs category.
Max Chen contributed to this article.