Two big ETF mysteries appeared today 10/01/09

Quote from nazzdack:

Would "flight to quality" be too simplistic? :cool:
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Let me spell it out for you: S/he is not trying to find out why the corporate junk bonds were dumping, he is trying to find out why the ETF's were selling offs, while the underlying were not. Here, it's not that hard ;-)
 
Quote from brettman9:
Okay...does anyone else have any thoughts on why it is that bond etfs sold off sharply on a day when corportate debt seems to have held up? Preferably ideas of a more...how shall I say...relevant nature?
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1) That other thing may have been too, too simplistic.
2) Consider this. Institutional investors hold bonds. Speculative traders hold ETF's. It's possible for the ETF to deviate greatly from the underlying bond portfolio because the bonds are in strong hands and the ETF's are in weak hands that are more prone to panic, regardless of what actual basis levels are between the ETF and the bond portfolio comprising the ETF. They're slower to get re-aligned. To trade corporate bonds too frequently can be very costly compared to "active" treasuries. :cool:
 
Yes, maybe the underlying bonds just didn't sell off because there was nobody trading them.. But I have no idea about frequency of trades in bonds, don't have access to a bloomberg either.
 
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