In a recent the Wall Street Journal Online video, Adam Najberg takes a look at fixed income ETFs in an interview with Matt Tucker, head of Fixed Income iShares from Barclays global investors
According to Tucker, investors look for liquidity, transparency and cost efficiency in equity exchange traded funds. All these characteristics translate into Bond ETFs. Bond ETFs also provide access to the over the counter market which, although not as liquid, enables the bonds to become a more transparent investment.
He continues by saying that Bond ETFs provide a very cost effective way to invest in bonds. He says that costs are not well understood in the bond markets. Tucker cites an example of the municipal bond market charging anywhere from 100 to 300 basis points while many investors usually do not know they are paying this.
Tucker says one very important trend in his sector is inflation and has seen a lot of money flow into his Treasury Inflation Protected Securities Fund (TIP). According to Tucker, investors look for the safety in today’s inflationary market.