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Stock markets globally sold off in February and March 2020 causing many investors to look for ways to diversify equity market risk. Bond ETFs are an efficient way to access the bond markets during bouts of volatility. Core bond ETFs can potentially offer protection when stocks sell off, while short duration bond ETFs can potentially offer stability and income.

AGG historically had positive returns during stock market selloffs.

AGG historically had positive returns during stock market selloffs

Performance data represents past performance and does not guarantee future results. Investment return and principal value will fluctuate with market conditions and may be lower or higher when you sell your shares. Current performance may differ from the performance shown. For most recent month-end performance see www.iShares.com. For standardized performance, see the next page. Index returns are for illustrative purposes only. Indexes are unmanaged and one cannot invest directly in an index. Financial Crisis measured 10/10/07 – 3/9/09, US Credit Rating Downgrade measured 7/25/11 – 10/3/11, Energy and EM Downturn measured 7/21/15 – 2/11/16, Fed Policy Reaction measured 1/29/18 – 2/8/18. Coronavirus Selloff measured 2/12/20-3/13/20.

Bond ETFs during market volatility

Bond ETFs have weathered a variety of stressed market events since 2002. In times of stress, bond ETFs tend to trade more, not less, as investors come to the stock exchange to transact. In February 2020, bond ETF liquidity grew and HYG traded more than 28 of the 30 stocks in the Dow. Despite the market turbulence and elevated volumes, trading in bond ETFs remained orderly. In fact, data suggest that investors increasingly turn to bond ETFs in periods of market stress.

Bracing portfolios for marketshocks

(NAV YTD through 3/13/20)

TickerFundMid Feb – mid March 2020 returnYTD returnDurationExpense ratio
AGG iShares Core U.S. Aggregate Bond ETF 0.65% 2.33% 5.9 0.05%1
IUSB iShares Core Total USD Bond Market ETF (0.50%) 1.14% 5.8 0.06%2
MUB iShares National Muni Bond ETF (2.61%) (1.01%) 6.1 0.07%
GOVT iShares U.S. Treasury Bond ETF 4.32% 6.25% 6.8 0.15%
TLT iShares 20+ Year Treasury Bond ETF 10.46% 16.59% 18.9 0.15%
NEAR iShares Short Maturity Bond ETF (1.30%) (0.95%) 0.6 0.25%
ICSH iShares Ultra-Short Term Bond ETF (-0.14%) 0.20% 0.4 0.08%
IGSB iShares Short-Term Corporate Bond ETF (-1.30%) (-1.00%) 2.6 0.06%
Stocks S&P 500 Index (19.58%) (15.73%) N/A N/A

Source: BlackRock and Bloomberg as of 3/13/20. Past performance does not guarantee future results. For standardized performance, click the tickers above. Index returns are for illustrative purposes only. Index performance does not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Some funds may have a contractual fee waiver in effect. See the end of this document for more information.

HYG and LQD trade more than many top stocks in the Dow

February 2020 Average Daily Trading Volume

HYG and LQD trade more than many top stocks in the Dow

Source: TRACE and Bloomberg as of 2/28/2020. The can be no assurance that an active trading market for shares of an ETF will develop or be maintained.

Same potential benefits, different asset class

Investors increasingly recognize that the potential benefits of ETFs—competitive performance, low cost and tax efficiency—apply to bonds just as they do to stocks.