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Vanguard: Managing Fixed Income Liquidity In A Crisis

Vanguard: „Overall across markets, we have seen muted flows across European ETFs, with investors rotating out of fixed income exposures into commodities. Equities and money market exposures also saw inflows.

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Andreas Zingg, Head of Switzerland and Liechtenstein


In fixed income, investors are net buyers of corporate bonds across USD-, EUR- and GBP-denominated issuances, together with global corporate bonds.

Overall, March has seen leaving European-domiciled ETFS, spread almost evenly between equities and fixed income.

Commodities and money market ETFs were positive contributors.

Our UCITS ETF range has seen inflows over March, but last week saw the first week of net outflows over 2020.

This was primarily driven by assets leaving our S&P 500 and FTSE 250 exposures.

Overall, global and selected country equity exposures still gathered the largest pools of assets, through FTSE All World High Dividend, FTSE All World and FTSE 100. Outflows remained focused on FTSE Emerging Markets and FTSE 250.   Fixed income exposures remain muted in flows.”

“In response to the COVID-19 crisis, investors have scrambled to get out of risk assets, in an attempt at hoarding cash in their portfolios. This has led to large fund redemptions, resulting in many fixed income funds rushing to sell their most liquid assets, which are typically short-duration and high-quality bonds.

Sellers by far outweigh buyers, not least because banks—which traditionally provided liquidity—have come under pressure themselves as their credit lines are drawn and it becomes harder for them to operate as they have done in the past. With banks less able to act as market-makers, liquidity is in short supply. We recommend to avoid trading around market open and make use of limit order.”

Source: ETFWorld.ch

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