Fixed Income ETF Liquidity: The Nonstory

January 04, 2017

Amidst the turmoil of the post-election bond market—with rates rising, trade volumes surging and reduced dealer support of the over-the-counter bond market, how did the market for fixed-income ETFs do?

One of the most interesting takeaways from the data is that there is no story here. In spite of all the concerns about the lack of liquidity in the fixed-income markets, the market for fixed-income ETFs appears to have functioned smoothly throughout the recent volatility.

Using a few of the largest taxable bond ETFs and municipal bond ETFs as proxies for the universe of fixed-income ETFs shows that trading volumes rose across the board—in the over-the-counter market for bonds as well as in the listed market for fixed-income ETFs. Of particular interest was the Friday after the election, which was Veterans Day—one of the few market holidays when stocks are open but bonds are closed. Note that the trade volumes for the ETFs that day were higher than the pre-election averages.


Daily Average Trading Volumes

For a larger view, please click on the image above.



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