One of the biggest stories of the past year Massive receivables in bond exchange-trading funds. In a less long-term world, investors are looking for any margin they can find, and some ETFs may yield a little more.
But beyond that basic background, there may be a more direct explanation for investor interest in equities of bond funds: the Federal Reserve.
In March, amid the sale of the Corona virus, the central bank said it was buying ETFs to stabilize the financial system – the bond market. Dave Nautic, an ETF entrepreneur who is now on ETFs, began researching the central bank’s footprint in the market.
The central bank may have achieved its goal better than anyone expected, Nadik finished. This is because the actual central purchases of ETFs are much smaller than the overall inflows.
“The central bank did exactly what it wanted to do here – buying enough in the open market, convincing the street that they were the first and last resort buyers, bringing investors on the ride,” Nadik wrote.
Here’s how big numbers break down. As of Aug. 31, $ 150.1 billion in bond ETFs (of which about $ 132 billion was US funds). At the end of August, however, the central bank bought only $ 8.7 billion in such funds.
|ETF Name||Fed Holdings||Central% of May-August attendance|
VanEg Vectors Fallen Angel High Yield Bond ETF ANGL.
iShares iBoxx $ High Yield Corporate Bond ETF,
Extrackers USD High Yield Corporate Bond ETF,
iShares Medium-Term Corporate Bond ETF IGIB,
iShares Short Term Corporate Bond ETF IGSB,
SPDR Bloomberg Barclays High Yield Bond ETF,
iShares iBoxx $ Investment Quality Corporate Bond ETF,
iShares 0-5 Year High Yield Corporate Bond ETF,
SPDR Bloomberg Barclays Short Term High Yield Bond ETF SJNK,
iShares 0-5 Year Investment Quality Corporate Bond ETF SLQD,
SPDR Portfolio Medium Term Corporate Bond ETF SPIB,
SPDR Portfolio Short Term Corporate Bond ETF SBSP,
iShares Broad USD High Yield Corporate Bond ETFUSHY
SPDR Portfolio Short Term Corporate Bond ETF,
Vanguard Intermediate-Term Corporate Bond ETF VCID,
Vanguard Short Term Corporate Bond ETF VCSH
|Source: ETF Trends Analysis|
Perhaps most importantly, the central bank did not start buying until May, when it was suspended in July. Overall receipts were strong in April as the central bank announced its intentions in the previous month. In August the jumps subsided slightly.
Now that some dust has been removed since March, the big question remains: is it healthy for the central bank to exert such an external impact on financial markets? Nadik wrote that it “must be resolved in the long run.” “But short-term? You have to say that the task is accomplished. ”