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Fixed Income ETF Volume Jumped in 2018, Says BlackRock

This article was originally published on ETFTrends.com.

As investors poured into fixed income ETFs last year, volume in those products surged as well, according to recent data from BlackRock. BlackRock is the parent company of iShares, the world's largest ETF sponsor and one of the largest issuers of bond ETFs.

In 2018, US-listed fixed income ETFs added a combined $97 billion in new assets, accounting for about 31% of all ETF inflows last year.

Amid four interest rate hikes by the Federal Reserve last year, many fixed income investors looked to manage duration risk by embracing low duration bonds and the related exchange traded funds, including the iShares Short Treasury Bond ETF (SHV) and iShares 1-3 Year Treasury Bond ETF (SHY) . SHV and SHY were two of last year's top asset gatherers among bond ETFs.

SHV tries to reflect the performance of the ICE U.S. Treasury Short Bond Index, which is comprised of U.S. Treasury bonds that mature in less than 1 year and provides targeted access to a specific segment of the U.S. Treasury market. The ETF comes with a 0.15% expense ratio, a 2.32% 30-day SEC yield and a 0.41 year duration.

“2018 was a record year for US FI ETF secondary trading volumes, with $2.2 trillion of aggregate volumes across issuers or $8.5 billion/day, on average,” according to BlackRock.

Bond ETF Volume Swells

Investors are continuing to display enthusiasm for bond ETFs early in 2019 as seven of the top 10 asset-gathering ETFs to this point in the new year are bond funds. That follows an active December in which bond ETF was robust and above the records set just two months earlier.

December 2018 was also a record trading volume month for US FI ETFs amid heightened market volatility, as volumes totaled $273 billion ($13 billion/day), a ~$28 billion increase from the previous record set in October 2018,” said BlackRock.

While asset growth across a variety of bond ETF segments was solid last year, volume increases easily outpaced flows increase, according to BlackRock.

The 2018 growth rate in Muni ETF trading volumes was 2.5X greater than comparable AUM growth,” said BlackRock. “This dynamic speaks to the increasing usage of FI ETFs by investors, both institutional and retail, for various portfolio applications such as tactical beta, liquidity management, strategic exposure, portfolio completion, and listed options use-cases.”

For more information on the fixed-income markets, visit our bond ETFs category.

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