iShares fixed income ETFs delivered liquidity and price discovery when investors needed it most.1

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Fixed income ETFs help investors trade in the bond market even when markets are volatile

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.


  • Investors have increasingly turned to fixed income exchange traded funds (ETFs) to help them navigate volatile markets.
  • During turbulent markets, fixed income ETFs provided investors with the flexibility and transparency they needed to efficiently rebalance risk in their portfolios.1

The Covid-19 crisis caused unprecedented market volatility throughout February and March 2020, spurred by pandemic concerns. During this period, investors increasingly used fixed income ETFs to see how bond markets were trading. The market volatility seen during this period demonstrated how fixed income ETFs can accurately show investors the price at which they can trade a broad pool of bonds, even in periods of market stress.

Proving the speculators wrong

Commentators have long speculated about what would happen should fixed income ETFs be tested by a “once-in-a-generation” market shock and raised questions about whether ETFs can withstand high levels of selling. Throughout February and March 2020, fixed income ETFs held up in extreme fixed income market conditions, by continuing to help investors trade in and out of the bond market.

Investors turned to fixed income ETFs

Investors turned to the most heavily traded fixed income ETFs to help them navigate bond markets. As they did so, these ETFs became an indicator for how to price the pool of individual bonds they typically offer exposure to, which had in some cases, stopped trading. 2 (Bonds trade directly between two parties (this is called over-the-counter), rather than on an exchange. This means that they can often stop trading when markets get volatile because it is not always clear where they should be priced). As market volatility increased from late February through late March 2020, iShares UCITS fixed income ETFs traded US$ 17.5 billion, this is more than twice their 2019 weekly average (US$7.8 billion).3

How did ETFs help investors?

As investors looked to rebalance risk in their portfolios, fixed income ETFs provided them with flexibility and transparency:

  • Flexibility: Fixed income ETFs helped investors trade in and out of bond markets immediately throughout the day during the market downturn, even when individual bonds were not trading. This is not possible in index mutual funds as they do not trade on-exchange throughout the day like an ETF.
  • Transparency: During the Covid-19 crisis, fixed income ETFs accurately showed investors the price at which they can trade a broad pool of bonds as fixed income ETFs kept trading throughout the day.
  • Performance: Investors likely ultimately use index-tracking fixed income ETFs to seek index performance. Many of the flagship iShares fixed income ETFs have tightly tracked their respective benchmark, even when markets were very volatile.2 Performance for every iShares ETF and the respective benchmark is available for all investors on a daily basis.  

What does this mean for the future?

Going forward we expect more and more investors to use fixed income ETFs as a simple, efficient way to access the bond markets. Fixed income ETFs offer investors flexibility, transparency and performance, even when markets are volatile.

1 During stressed markets, iShares UCITS fixed income ETFs traded an average of US $17.5B (21 Feb –20 Mar 2020), more than twice the 2019 weekly average of $7.8B. All amounts in $USD.
2 Source : BlackRock, “Sending a clear signal” April 2020.
3 iShares UCITS fixed income ETFs traded on average of US $17.5B (21 Feb – 20 Mar 2020) vs. the 2019 weekly average of $7.8B. All amounts in $USD.