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ETFs for bond investors

Access markets on demand with bond ETFs

Regulatory and structural shifts have made trading bonds more difficult in recent years. Institutional investors are increasingly turning to bond ETFs for liquid, low-cost bond exposure without the structural challenges of the over-the-counter market.

The benefits of bond ETFs

1. Simple: Gain diversified access to broad and targeted bond exposures in a single-trade.

2. Fast: ETFs give investors the ability to trade fixed income exposure quickly.

3. Efficient: Compared to transacting in individual bonds, ETFs can offer significant trade cost savings.

  • View transcript

    Investors face an entirely new set of challenges in today’s global markets. Lower return expectations, increased uncertainty, and game-changing regulations are making building portfolios more difficult than ever. At the same time, some markets are becoming less liquid and harder to trade in, putting some opportunities just out of reach.

    Overcoming these challenges requires a rethinking of how we gain access to investment exposures. Exchange traded funds, also known as ETFs, are a financial technology democratizing access to the global financial markets.

    ETFs bundle hundreds of securities into standardized and transparent packages that provide exposure to distinct segments of the market. Those packages are then listed and traded on an equity exchange and made available to investors of all types. In this way, ETFs transform asset classes into markets on demand, providing diversified access to broad and narrow exposures in a single trade.

    They are quickly becoming a must-have tool to pursue opportunities no matter the asset class—whether that’s US equities, investment grade bonds, global equities, high yield bonds, or even emerging market debt. With ETFs, investment ideas can be turned into investment actions.

    And nowhere is the value of an ETF more apparent than in asset classes that can be inefficient, expensive and opaque, like fixed income. For example, to gain diversified high yield bond exposure, an investor may have to purchase hundreds of illiquid bonds in the over-the-counter market, negotiating with a dealer on the price for each bond in what can be a lengthy and complex trading process.

    Instead, investors can now buy a single, liquid ETF on a stock exchange to cost effectively gain exposure to high-yield--or just about any other asset class.

    Simple, fast, and efficient, ETFs can act as investment building blocks to augment existing portfolios or build highly customized strategies from the ground up.

    That’s why today, ETFs are a technology investors can use to seamlessly buy, own and sell asset classes from around the world of investments. Simply put, ETFs offer markets on demand.

    Learn more at iShares.com.


Find the bond ETF that fits your investment objective

iShares ETFs offer comprehensive coverage across the yield curve. Use this interactive chart to find bond ETFs across asset classes, yield, and duration.

Click below to select or remove exposures

The performance quoted represents past performance and does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance may be lower or higher than the performance quoted. Obtain standardized performance and performance data current to the most recent month end.


Learn how institutions use bond ETFs

Constructing a diversified bond portfolio, accessing niche sectors with limited trading resources or investing a significant inflow of cash into an existing portfolio may present challenges.

When gaining exposure to a specific sector is difficult, investors may benefit from using ETFs to help complete an asset allocation or access new market segments.

ETFs can be used for portfolio completion

ETFs can be used for portfolio completion

For illustrative purposes only.

ETFs are frequently used as tactical trading tools because they provide investors with the ability to gain exposure in a timely, cost-effective and efficient manner. ETFs make it possible to express broad-based sector views quickly while limiting idiosyncratic and unintended curve risks.

In this example, an investors takes a view on high yield bonds by opening a position in the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) when credit spreads are wide. The manager closes the position when they tighten.

Trade credit spreads with an ETF

Trade credit spreads with an ETF

Source: Bloomberg, as of 6/30/16. For illustrative purposes only. Not meant to be investment advice.

Cash flows into and out of a portfolio can disrupt performance. Challenges may arise when assets need to be liquidated during difficult market conditions to meet a withdrawal. Conversely, large cash inflows may sometimes result in excess cash positions when managers face delays in sourcing bonds.

ETFs can be added to portfolios to provide an additional liquidity layer, acting as a buffer to help manage inflows and outflows, while providing a way to manage market exposure.

Portfolio funding options to fulfill a large redemption

Portfolio funding options to fulfill a large redemption

For illustrative purposes only.

The next generation bond market
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