Six Park co-founder and co-CEO Pat Garrett talks to ETF Stream about why Australian bond ETFs are unlikely to be affected long-term by the Reserve Bank’s new money printing program.

“The efficiency of fixed income ETF trading in the markets should, and already has, improved with help from the RBA,” he says.

“The ETF indices and the structure of the fixed income ETFs should not change due to the RBA’s actions.”

Thanks to the coronavirus, bond trading came to a virtual standstill in March, causing many bond ETFs to trade at steep discounts to their fair values – known as the “net asset value”, or NAV.

Following the lead of the Federal Reserve in the United States, the RBA stepped in to backstop the country’s bond market. The intervention succeeded in soothing nerves and the benefits were then passed on to ETFs, which presuppose a smooth and efficient underlying bond market when their NAVs are calculated.

This article also features commentary from Stockspot and Vanguard.

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Published May 6, 2020

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