Carving Up the Bond Market Swells Into $39 Billion ETF Business

Money managers are flocking to extremely precise fixed-income exchange-traded funds as a hawkish central bank and economic uncertainty batter the bond market.

Assets in BlackRock Inc. and Invesco Ltd.’s maturity-focused bond ETFs, which hold debt maturing in a certain year, have soared to all-time highs this year, data from the issuers show. BlackRock’s iBonds lineup now holds over $22 billion, while Invesco’s BulletShares suite of funds isn’t far behind with over $16 billion.

The highly specific ETFs were once niche products with a couple of billion dollars between them a decade ago. In recent years, they have ballooned amid sticky inflation and the Federal Reserve’s historically aggressive campaign to cool it. That backdrop fueled volatility across fixed-income markets as yields rocketed higher over the past year. As a result, money managers and financial advisers are hyper-focused on managing interest-rate risk in portfolios, according to VettaFi’s Dave Nadig.

“Advisers and quasi-institutional folk are all about balancing credit and duration risks on the head of a pin right now,” said Nadig, financial futurist at data provider VettaFi. “Almost literally every conversation I have with an adviser is about what the heck to do about the bond portion of their portfolio.”

Maturity-Focused Bond ETFs Boom |

Managing duration risk — a measure of sensitivity to rate changes — has taken on an increased urgency over the past year after policymakers lifted rates by 500 basis points from rock-bottom levels over 10 consecutive hikes. Benchmark 10-year Treasury yields currently stand near 3.7%, after entering March 2022 near 1.7%.