Are Bond ETFs Dangerous?

Are bond ETFs a robust investment vehicle or are they fragile? This paper defines four potential scenarios where a flaw in the bond ETF structure would be responsible for a severe loss to investors. We discuss why some market observers are specifically concerned about bond ETFs.

We describe how bond ETFs are traded, and assess their risk of dislocation. Our analysis of the evidence overwhelmingly supports the view that bond ETFs are generally robust.