
Rise of Bond ETFs Mean Little Mourning for the Middlemen – FT
December 9, 2016 \
5 Comments
Full Article: Financial Times
ETFs have become the easiest way for US and European investors to trade bond risk without a middleman. The bond ETF is adding liquidity, sharpening price discovery, and reducing pressure on banks’ balance sheets, especially under stress
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5 Comments on "Rise of Bond ETFs Mean Little Mourning for the Middlemen – FT"
There’s no doubt that ETFs are having an impact on trading activity in fixed income, but it seems to me that the underlying processes of creation and redemption will generate activity in the underlyings as well as “upstairs” block ETF trades put together by brokers.
Exchange traded ETF’s bring together retail and institutional interest in a myriad of investment strategies across several adjacent FI products. I believe that has to drive flow downstream for larger outright and complex cash trades. Long term plus for the “middlemen”, whomever they may be. Their business model may evolve, but you will need them more than ever.
Here is something to think about. How do you value a corporate bond ETF if there are no underlying markets/prices in the bonds making up the ETF????
By definition do the ETF market makers also become the de facto market makers for the underlyings as opposed to today where many of the AP’s activity is dominated by taking liquidity?
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