A decade ago, investors were still trying to figure out how to use the first bond ETFs. Three iShares Treasury ETFs and one iShares investment-grade ETF launched in July 2002. Now there are more than 265 bond ETFs and assets exceed $275 billion.
Assets have continued to pour in this year. Fixed income ETFs are 15 percent of the U.S. exchange-traded product market, but in the first five months of this year saw 54 percent of the inflows, according to BlackRock. In May, more than $11 billion flowed into fixed income products, across all bond asset classes. U.S. government ($7.2 billion)--holding bonds with relatively strong credit profiles—was the leader, followed by high yield ($1.2 billion)--holding bonds with relatively weak credit profiles.
Bond ETFs can be used to manage interest rate exposure tied to the Federal Reserve, credit quality as investors seek greater yield from lower-quality bonds and to capture global fixed-income opportunities.