Pricing and Liquidity of Fixed Income ETFs in the Covid-19 Crisis of 2020

Liquidity: Bid-ask spreads - “liquidity mismatch"? Average bid/ask spread (price bps), March 2020 160 140 120 100 80 60 40 20 0 Broad U.S. Market treasuries ETF bid/offer BlackRock L 11 Investment High yield Emerging grade corporates market corporates debt Source: BlackRock, Bloomberg. 3/31/20 Underlying bid/offer Bid/ask spreads for fixed income ETFs are much lower than that of individual bonds. Is this a concern - "Liquidity mismatch"? No. Bond ETFs should trade at tighter spreads (portfolio effects, transparency/efficiency of exchange). Bond ETFs represent a diversified portfolio of bonds: less idiosyncratic risk than individual bonds. ICRMH0920U-1319728-9/13

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