So much for the sleepy bond market.
oversees a key corporate debt exchange-traded fund (ETF) that the fund says currently trades in higher daily volume than shares of most blue-chip companies in the Dow Industrials Jones
iShares iBoxx Daily Trading Volume $ High Yield Corporate Bonds ETF
climbing to over $2 billion by the end of 2020, topping the stock volume of 25 of the 30 stocks in the Dow (see chart).
and Walmart Inc.
when averaging over a year.
By that measure, trading in just HYG has outstripped 5 of the 30 stocks in the Dow benchmark: Apple Inc.
Walt Disney Co.
and Salesforce.com Inc.
According to Steve Laipply, head of US Treasury ETFs at BlackRock, the bid-ask spread is 1 basis point.
“Over the past few years, bond ETF adoption has accelerated significantly — and to an even greater extent in 2020 — especially among institutional investors,” Laipply wrote in a client note. .
HYG, with $20 billion in assets under management, is the largest U.S. ETF of its kind that tracks the market for nearly $1.6 trillion in U.S. corporate bonds, or debt issued by American companies. was previously considered to be at high risk of default.
Its next biggest ETF competitor is the SPDR Bloomberg Barclays High Yield Bonds ETF
with $9 billion in assets under management. Taken together, they generate $30 billion less in assets, or fall in the group when compared to the broader US high-yield bond market.
In other words, ETFs, like Twitter, have become a way to get a regularly updated view of what’s happening.
“For that reason, it becomes somewhat draining,” said Ken Monaghan, co-head of high productivity at Amundi US.
While his team doesn’t currently use ETFs, they can serve as an initial line of defense in turbulent times, he said, as stocks could be the way to go faster — and more ideally. is less painful – to sell the risk of buying back.
“What a portfolio manager is trying to do is when the market really gets in the way,” Monaghan said, not “sell 10 points off the bond, because that would crystallize the loss – and you’re trying not to do that.”
What is liquidity, not
Junk bond ETFs, on the other hand, can slide as quickly as stocks, which is the case in March 2020 (see chart), before the Federal Reserve and other global central banks roll out. a series of emergency pandemic aid.
“Liquidity is good, pointing to junk bond ETFs that have plummeted at the start of the pandemic, because prices have remained volatile,” said Bryce Doty, senior portfolio manager at Sit Investment Associates. bound by the bond offset. they refer.
“You got this great liquidity draw with the big bears,” said Doty. “But they will destroy liquidity when they decide to sell at once. I am very pleased with it. “
Even so, this year’s high-yield U.S. companies defaulting, or “junk ratings,” have headed for all-time lows, following an early pandemic outbreak. Debt issuance has also boomed, yields hit all-time lows, and the Federal Reserve has continued to pump liquidity through markets, despite mounting inflationary pressures.
Against that backdrop, HYG’s total cumulative return was 9.4% Monday over two years ago, compared with 55% for the S&P 500 index.
according to FactSet.
https://www.marketwatch.com/story/what-trades-more-in-a-day-than-most-dow-stocks-its-a-big-junk-bond-etf-11637022361?rss=1&siteid=rss | What trades more in a day than most Dow stocks? It’s a Big Junk Bond ETF