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Exchange-traded funds (ETFs) that only invest in bonds are known as bond exchange-traded funds (ETFs). Because they hold a portfolio of bonds with varied specific strategies—from U.S. Treasuries to high yields—and holding periods—between long-term and short-term—they are comparable to bond mutual funds.
Similar to stock ETFs, bond ETFs are passively managed and trade on major stock exchanges. In times of stress, this increases liquidity and transparency, which helps to foster market stability.
Exchange-traded funds (ETFs) that invest in different fixed-income instruments, such as corporate bonds or Treasuries, are called bond ETFs.
Bond ETFs make it affordable for regular investors to acquire passive exposure to benchmark bond indices.
Treasuries, corporates, convertibles, and floating-rate bonds are just a few of the bond categories for which bond ETFs are offered.
Laddering is also possible with bond ETFs. Investors need to be aware of the dangers associated with bond ETFs, especially the impact of changing interest rates.
In contrast to individual bonds, which are traded over the counter by bond brokers, bond ETFs trade continuously throughout the day on a centralized market. Finding a bond with an appealing price might be challenging for investors because of the structure of traditional bonds. By trading on significant indices, such as the New York Stock Exchange, bond ETFs circumvent this problem (NYSE).
