Bond ETFs Can Survive More Volatile Sell-Offs

J.P. Morgan Chase & Co. also mirrors the same sentiment, proposing that investors shouldn’t be too concerned about the negative sentiment from ETFs.

“Given record high outflows from U.S. HY bond ETFs, very high short interest ratios and rising costs of funding shorts, bearish sentiment in both U.S. high yield and high-grade bonds appears stretched and looks vulnerable to a reversal,” strategists led by Nikolaos Panigirtzoglou wrote in a recent note.

The strategists argue that the increased popularity and usage of ETFs is strengthening the overall ecosystem.

“Fixed-income ETFs are getting increasingly popular and, as a result, are adding liquidity to the mostly illiquid corporate bond market,” the BofA strategists concluded.

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