US Bond ETF Launches Surge 50% Year-Over-Year, Launches of bond-focused exchange traded funds have nearly doubled over year-ago levels in 2024, boosted by expectations of interest rate cuts by the Federal Reserve, according to data from CFRA and Strategas.
The number of launches has spiked this month, with bond products making up 46 per cent of all ETF debuts, according to CFRA. New products run the gamut, from those offering municipal bond exposure to others focused on high yields and collateralized loan obligations.
“There are some issuers out there realizing that fixed income is going to be a really big trend in general, and that there’s a unique opportunity to add a product to the market that would be a more creative alternative to the big, broad bond index ETFs,” said Todd Sohn, head of ETF analysis at Strategas.
A key factor driving interest this year has been anticipation that the Fed will cut interest rates in 2024 – a process that began with a 50 basis point reduction last week. Officials have penciled in another 150 basis points in cuts by the end of 2025, according to the Fed’s latest Summary of Economic Projections.
Investors have also been eager to lock in yields near multi-decade highs before they fall.
Inflows for September stood at $22.9 billion as of Sept. 20, according to Trackinsight, a Paris-based firm that monitors the global ETF industry.
Aggregate Bond ETF and the Vanguard Total Bond Market ETF, each with about $120 billion in assets. These two passive bond funds track the Bloomberg U.S. Aggregate index and a float-adjusted version of that index, respectively.
“Fixed income investors have a long-standing preference for actively-managed products,” said Scott Davis, head of ETFs at Capital Group, noting that nearly 80 per cent of all fixed income mutual funds fall into that category.
