Warning For Credit ETFs: Liquidity May Be Threatened By Underlying Asset Liquidity
LQD tracks an investment grade index, and its dislocations are wider than those of equity ETFs.
Moody's also examined BKLN and HYG
Thus, they note that equity ETFs remain very liquid even during times of extreme volatility in their underlying index. However, credit ETFs display very obvious differences during times of turbulence in the markets.
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