Recent data from the largest 20 investment grade and high yield (HY) bond exchange-traded funds (ETFs) indicate bond ETF trading patterns shifted materially during five market stress periods over the last 21 months.
That’s according to a new Fitch Ratings report ‘High Yield Bond ETFs: Investors Seeking Liquidity During Market Volatility’, which reveals that the trading swings are particularly noticeable in the HY market.
Fitch’s analysis indicates that investors are favouring ETFs as vehicles to express changing views on the HY market. This reflects the lower levels of liquidity in the underlying HY bonds, and the importance of liquid investments amid market uncertainty on interest rates and macroeconomic fundamentals.
