Money Market Funds
Operations and Technology
Bloomberg Ignores the Evidence on Bond ETFs
By Mike McNamee
September 26, 2014
In response to “Pimco ETF Probe Spotlighting $270 Billion Market Vexing FSB,” we posted the following comment on Bloomberg News’ website:
As this story notes, ICI's empirical research shows that the vast majority of ETF market activity does not trigger activity in the underlying markets. It is not correct to assert that every bond ETF trade requires someone to buy or sell bonds. That should help allay concerns about any systemic effects of ETF trading.
More generally, however, the sweeping assertion that “trading in ETFs is fueling price swings that may become more severe in a downturn” is not substantiated in the story. There is no data—not even an anecdote—in the story demonstrating that ETF trading has driven prices in underlying bond markets. In fact, the vast majority of research on collective investments like ETFs shows just the opposite—fund investors tend to respond after prices have moved in the underlying markets, as we point out here and here.
We also have prepared a careful study demonstrating the statistical and analytic errors in the “taper tantrum” paper that this article cites at length.
Debates over financial stability need to be informed by data and research. At ICI, we're doing our part: check out www.ici.org/financialstability.
Mike McNamee is ICI’s chief public communications officer.
The Real Lessons to Be Learned from 1994’s Bond Market
By Brian Reid
July 29, 2014
A recent “Heard on the Street” column in the Wall Street Journal (“Heeding 1994's Bond-Market Lesson,” July 27, 2014) is correct in saying that there’s a lesson to be learned from the 1994 bond market—but it draws the wrong lesson.
“Market Tantrums” and Mutual Funds: A Second Look
By Sean Collins and Chris Plantier
May 19, 2014
Over the past year, policymakers who are focused on financial stability have pursued a theory that mutual fund investors can destabilize financial markets by redeeming from funds when markets decline. According to this theory, redemptions by fund investors lead fund managers to sell securities; those sales drive asset prices down further and, in turn, spur more investor flight, redemptions, and price declines.
ETFs Don’t Move the Market—Information Does
By Shelly Antoniewicz
March 11, 2014
There they go again.