I have witnessed four fixed income crises in my career. On each occasion, in the wake of the crisis, Fixed Income ETFs were both heralded for their relative liquidity and demonised for their discounts to NAV. In reality, the perceived discount of the ETF is overstated in times of market stress. This is due to the simple fact that bonds are not traded and bond mutual funds are omitting the implied value change in their holdings because they are able to hide behind the stale prices of the bonds. The status quo for fixed income traders during a crisis is something akin to a soldier in a foxhole waiting for the income barrage of artillery, duck down, hope for the best and wait for it to pass. […]
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