Pricing and Liquidity of Fixed Income ETFs in the Covid-19 Crisis of 2020
Price Discovery:
Market Price vs. NAV?
Deviation of Dealer Quotes to Actual Trade Price
Standard Deviation in
Price (HY)
% of LQD Universe
45%
40%
35%
30%
25%
20%
15%
10%
2
Source: FINRA TRACE, Dealer quotations.
5%
1.6
0%
1.2
0.8
0.4
0
2-Jan-20
HY (Price Domain)
2-Feb-20
40%
0-5 times
Trading activity in LQD universe, March 2020
33%
My
6-10 times
2-Mar-20
50
11%
40
10-15 times
30
20
10
2-Apr-20
IG (Spread Domain)
0
Standard Deviation in
Spread (IG)
16%
16+ times
Source: FINRA TRACE, BlackRock from 3/2/2020 -3/20/2020. Includes only end
investor buys and sells - not dealer-to-dealer trades.
BlackRock
What Causes Discounts on Bond
ETFs vs. NAV?
(
Fund NAV is calculated once
per day using actual trades,
dealer "runs", and estimation
methods.
Majority of bonds do not
trade on a given day - NAV
largely based on estimation.
These dynamics are
exacerbated during periods
of volatility.
The ETF price reflects an
actionable trade on
exchange.
ICRMH0920U-1319728-4/13View entire presentation