Just a brief story running on the WSJ today about the gaining popularity of bond ETFs. After investors have fled the equities to move to the safer government bonds and the higher yielding corporate debt, they found out they don’t have to be directly invested in these securities with ETFs serving as a good, more liquid and more flexible alternative. As ETFs, the stocks are also exposed to the fixed income instruments, whose benefit comes from the regular stream of income it provides its believers.
A little something something about ETFs:
At the end of June, there were 740 ETFs listed in the U.S. with total assets of nearly $600 billion, according to State Street Global Advisors. Bond ETFs accounted for only 63 funds and $78 billion, but the fixed-income portion of the business is expected to expand in coming years with bond giant Allianz’s Pacific Investment Management Co. and others entering the fray.
Some of the bond ETFs the story mentioned include LQD, an ETF with exposure to investment-grade corporate bonds, SPDR Barclays Capital High Yield Bond ETF or JNK, which is focused on high-yield or junk bonds, and perhaps one of the most popular – iShares Barclays TIPS Bond Fund, which is the TIP. Another possible option it failed to mention is the TBT, which shorts Treasurys with maturity of 20+ years.