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Navigating Volatile Markets with Fixed Income ETFs

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  • (1:15) - What Is Fueling The Current Market Shift In Sentiment?
  • (6:30) - What Exactly Is the Basis Trade?
  • (11:00) - Breaking Down The Bond Markets and What Performs The Best?
  • (16:20) - Can We Expect The Federal Reserve To Take Any Action Anytime Soon?
  • (20:30) - How Should Investors Position Their Portfolios Going Forward?
  • (25:00) - What Are Money Market Funds And How Can You Benefit From Them?
  • (31:45) - What Are CLO ETFs and Should You Be Using Them In Your Portfolio?
  • (37:40) - Episode Roundup: SGOV, GMMF, PMMF, BINC, JAAA
  • Podcast@Zacks.com

 

In this episode of ETF Spotlight, I speak with Dhruv Nagrath, Director and Fixed Income Product Strategist at BlackRock, about the recent volatility in the bond markets and whether there are attractive opportunities for investors amid the turmoil.

The stock market often grabs more attention, but last week, experts were focused on the $140 trillion global bond market. In fact, the volatility in bonds reportedly prompted the Trump administration to announce a suspension of the so-called reciprocal tariffs.

U.S. Treasuries are traditionally considered a safe haven during periods of financial market stress. Bonds, in fact, performed quite well in the first quarter when equities struggled.

However, last week, Treasury yields rose sharply, and prices plunged. There are plenty of theories behind the move—from investors selling assets to meet liquidity needs, to technical factors, selling by Chinese and Japanese investors, and the unwinding of basis trades.

We saw a clear investor preference for safety in the first quarter. The iShares 0-3 Month Treasury Bond ETF (SGOV - Free Report) was among the top 10 asset gatherers. Should investors continue to favor ultra short-term U.S. Treasuries amid elevated market volatility?

Money market fund assets have surpassed $7 trillion, reflecting investors’ strong preference for cash—and these funds continue to offer attractive yields. Consider the iShares Government Money Market ETF (GMMF - Free Report) and the iShares Prime Money Market ETF (PMMF - Free Report) .

BlackRock continues to recommend high-quality, income-producing ETFs focused on the short end and the belly of the curve. Actively managed fixed income ETFs, like the BlackRock Flexible Income ETF (BINC - Free Report) , have also gained popularity among investors.

CLO ETFs saw significant interest last year and earlier this year but have recently experienced outflows. Bloomberg reported that the $20 billion Janus Henderson AAA CLO ETF (JAAA - Free Report) saw its largest single-day outflow last week and was trading at 1.1% below its NAV.

Interestingly, even the most liquid ETF in the world—the SPDR S&P 500 ETF Trust (SPY - Free Report) —traded at its widest premium to NAV since 2008 last week. Despite the violent swings in asset prices and record trading volumes, ETFs proved to be excellent liquidity vehicles for both traders and investors.

Tune in to the podcast to learn more.

Make sure to be on the lookout for the next edition of the ETF Spotlight and remember to subscribe! If you have any comments or questions, please email podcast@zacks.com

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