Our panel of experts discuss the fixed income ETF creation and redemption process, how a well-managed custom basket process may support efficient executions, and how bond ETF arbitrage functions in a balanced ecosystem .
As fixed income ETFs become more widely adopted globally, it becomes critical for all investors to understand the underlying mechanics of these investment vehicles. To answer some of the key questions facing investors, we gathered a group of experts from across State Street Global Advisors and Jane Street to offer their insights. These insights reflect our panelists’ experience across capital markets, fixed income trading and indexing, and risk management.
Among the many topics covered, our panel addressed the following:
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Bonds generally present less short-term risk and volatility than stocks, but contain interest rate risk (as interest rates raise, bond prices usually fall); issuer default risk; issuer credit risk; liquidity risk; and inflation risk. These effects are usually pronounced for longer-term securities. Any fixed income security sold or redeemed prior to maturity may be subject to a substantial gain or loss.
International Government bonds and corporate bonds generally have more moderate short-term price fluctuations than stocks, but provide lower potential long-term returns.
ETFs trade like stocks, are subject to investment risk, fluctuate in market value and may trade at prices above or below the ETFs net asset value. Brokerage commissions and ETF expenses will reduce returns.
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SPDR ETFs is the exchange traded funds (“ETF”) platform of State Street Global Advisors and is comprised of funds that have been authorised by Central Bank of Ireland as open-ended UCITS investment companies.
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Exp. Date: 31/08/2022