Consequently, due to these new rules, big banks have been hoarding debt and have become less active traders in fixed-income securities, which has led to diminished liquidity in the bond markets. According to iShares data, less than one third of the bonds in Markit iBoxx Liquid Investment Grade index traded on a daily basis during 2014. [Reviewing Junk Bond ETFs]
“In that context, we think for investors that want daily access to investment-grade corporate bonds, ETFs have been and in our view can continue to be a solution,” Rosenbluth added.
For instance, the iShares iBoxx $ Investment Grade Corporate Bond ETF (NYSEArca: LQD) trades intra-day more than 3 million shares. Other actively traded ETFs include the iShares 20+ Year Treasury Bond ETF (NYSEArca: TLT) and SPDR Barclays High Yield Bond ETF (NYSEArca: JNK). According to MarketScope Advisor data, 20 taxable fixed income ETFs trade an average 500,000 shares or over on a daily basis.
Consequently, as investors find it harder to deal with individual debt securities, more are turning to liquid bond ETFs to weave in and out of fixed-income markets instead. [Junk Bond ETFs Liquidity]
For more information on the fixed-income market, visit our bond ETFs category.
Max Chen contributed to this article.