This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Discovering Certainty and Income Payments in Short-Term Bond ETF.

By Juliette Fairley

NEW YORK ( MainStreet)--Investor concern for potentially rising interest rates is causing a surge of inflows into shorter duration fixed income assets, according to Blackrock.

About $21 billion has moved into fixed income ETFs this year with $15 billion flowing into assets with less than three years in duration.

"Last year short duration took in nearly nothing and was almost flat the first four months of the year," said Matthew Tucker, head of iShares Fixed Income Investment. "This year it's been a driver of flows."

The trend prompted Blackrock to launch four iShares Bonds with shorter maturities of three years, five years, seven years and ten years, allowing individual investor to buy a basket of 90 corporate bonds in one trade for as little as $100 that will liquidate in three or five years.

"The iShares bond is designed to bring together the benefits people enjoy about our traditional ETFs such as exchange liquidity, diversification and precision and combine them with the benefits people like about bonds mainly regular income payments and a known end date to the investments," said Tucker.

Greenwich Associates released its annual study this week on how ETFs are being used. The report found that while nearly 90% of institutions use ETFs for domestic equities exposure and 74% use ETFs for international equity portfolios, ETFs are gaining traction in the fixed income space with 55% of institutions investing in domestic fixed income ETFs.

"While some may consider ETFs passive investment vehicles, the Greenwich survey results demonstrate that institutions are using ETFs actively to achieve better strategic and tactical investment outcomes," said Daniel Gamba, head of BlackRock's iShares Americas Institutional Business.

Usage of domestic fixed income is most common among insurance companies at 78% while 74% of RIAs employ ETFs in domestic fixed income. overall, institutional investors are employing ETFs more and more for strategic rather than tactical purposes. Tactical is defined as holding an investment for less than a year.

"As a result of the Volker Rule, Dodd Frank and Basel 3 coming online, banks and broker dealers are less able and capable to hold inventory for bonds than they were five years ago," said Tucker. "That means it's harder to trade fixed income today so trading volume is down because there's less inventory readily accessible."

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs