In a recent piece for Pensions & Investments, I highlighted a $1.4 billion underlying-for-ETF trade made in 4 iShares ETFs. The trade was discussed by BlackRock CEO Larry Fink at a September conference and again by the head of iShares in October. This not so subtle signal was a call-out to large institutions that bond ETFs are the new dealers.
With dealer inventory down significantly since 2008, corporate debt investors will increasingly find that their path to liquidity is through an ETF (and, of course, its management fee.) In the article, I also point to a recent study by The TABB Group which concludes that price discovery and liquidity of corporate bonds through ETFs could hasten the shift to more transparent and electronic bond exchanges.