Bond ETF Growth Undeterred By High Yields

by: Tom Lydon

Fixed-income ETFs are trying to catch up to their stock-fund cousins; but will the pullback in the bond market mixed with Treasury yields hitting multi-year highs hurt their chances?

Yields on the 10-year Treasury recently passed the 5% mark and touched 5-year highs as bond prices lost ground due to their opposing moves to yields. John Spence of MarketWatch.com reports the recent upheaval in bond markets shouldn't deter ETF producers from launching fixed-income funds that are in the works. Considering the size of the fixed-income market, there is still room for growth.

Bond ETFs are popular for an individual investor because they have low expense ratios and indexed bond ETFs reduce the need to continually buy and sell bonds to maintain a targeted maturity. However, there is concern over the need to trade bonds throughout the day, especially since their prices don't move as much as their equity counterparts.

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