Bond dealers are standardizing methods for analyzing fixed-income exchange-traded funds as they seek to boost trading.
BlackRock Inc. and State Street Corp. said they’re among firms that have agreed to calculate yields, spreads and durations of ETFs in the same way, according to a statement on Monday. That will allow debt investors to compare the funds with other bonds and derivatives, said Mark Wiedman, global head of BlackRock’s iShares ETF unit.
“Developing a global market standard for bond ETFs is critical for the future evolution of fixed-income markets,” Wiedman said. “A common language and framework improves investors’ ability to analyze bond ETFs relative to other fixed-income instruments. This creates exciting new opportunities for bond investors to accelerate their use of ETFs.”
Fixed-income ETFs, which trade like stocks and can be purchased online, are gaining popularity because it’s become increasingly challenging to buy corporate bonds. Though the funds have grown to $450 billion globally since their inception in 2002, they represent less than 0.4 percent of the total bond market, according to the statement.
“In an environment with increasing capital requirements and constraints, investors are hungry for alternatives like fixed-income ETFs to help them source liquidity,” said Brian Levine, head of cross-asset ETF products and co-head of global equities trading at Goldman Sachs Group Inc.
Trading-platform Tradeweb and Bloomberg LP, the parent of Bloomberg News, along with other broker dealers also agreed to the new market standard, according to the statement.