:Launches of bond-focused exchange traded funds have surged from year-ago levels in 2024, boosted by expectations of interest rate cuts by the Federal Reserve, according to data from CFRA and Strategas.
Nearly 120 bond ETFs have been launched so far this year, compared to 79 at the end of September 2023, data from Strategas showed.
The number of launches has spiked this month, with bond products making up 46 per cent of all ETF debuts, according to CFRA. That compares to an average of about 20 per cent of all launches throughout 2024. 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.
Falling interest rates are seen as beneficial to bonds, since they tend to push down yields, which move inversely to bond prices. Investors have also been eager to lock in yields near multi-decade highs before they fall.
The benchmark 10-year Treasury yield recently stood at around 3.75 per cent, down from a high of just above 5 per cent last October.
Issuers have also been encouraged by the growing inflows in bond ETFs. Average monthly net