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Creations and Redemptions in Fixed-Income Exchange-Traded Funds: A Shift from Bonds to Cash

Rohan Arora (), Sébastien Betermier, Guillaume Ouellet Leblanc (), Adriano Palumbo and Ryan Shotlander

No 2019-34, Staff Analytical Notes from Bank of Canada

Abstract: The creation and redemption activity of fixed-income exchange-traded funds listed in the United States has shifted. Funds of established issuers have traditionally exchanged their shares for baskets of bonds. In contrast, young funds managed by new issuers tend to create and redeem their shares almost exclusively in cash. Cash transactions imply that new funds are taking on exposure to liquidity risk. This has implications for financial stability.

Keywords: Financial markets; Financial stability (search for similar items in EconPapers)
JEL-codes: G1 G20 G23 (search for similar items in EconPapers)
Pages: 8 pages
Date: 2019-12
New Economics Papers: this item is included in nep-fmk
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Handle: RePEc:bca:bocsan:19-34