The markets saw a spike in volatility and heightened trading activity in October, with bond ETFs experiencing a record month in volume trades.
According to BlackRock data, October 2018 was a record month for U.S. bond ETF trading volume at $245 billion in aggregate volumes, or $11.2 billion per day across all providers.
BlackRock’s iShares ETF bond suite made up 66% of overall trading volumes for the month, averaging $7.8 billion per day, and U.S. iShares bond ETF trading volumes were 29% higher year-over-year.
“Record trading volumes during October’s bout of market volatility shows how fixed income investors are increasingly utilizing bond ETFs to manage risk. The volumes also show that bond ETFs have been a positive force for stability, adding liquidity and price transparency in high velocity markets,” according to a BlackRock note.
October was also a record trading volume month for a number of bond categories, including high-yield, investment-grade corporate debt and active short ETFs.
Specifically, in October, high-yield bond ETFs traded $3.2 billion per day, with iShares HY ETFs making up 66% of the total share at $2.1 billion per day. Investment-grade corporate bond ETFs traded $1.7 billion.
“Record trading volumes during October’s bout of market volatility is further evidence that FI investors are increasingly utilizing FI ETFs to manage risk, liquidity and aid in price discovery in high velocity markets,” according to BlackRock.
Many naysayers and critics have warned that during periods of high volatility, especially in the rising rate environment, bond ETF investors could head for the exits in droves, causing pricing discrepancies on the heavy redemptions as providers try to exchange ETF shares for less liquid individual debt securities.
However, the recent activity only shows that many investors have relied on the ETF investment vehicle as a way to manage exposure and help price discovery in periods of extreme market oscillations.
For more information on the ETF industry, visit our ETF performance reports category.