Trading activity in US fixed-income ETFs has suddenly surged. According to Goldman Sachs, fixed-income ETFs now account for 27% of total ETF trading volume, the highest in at least six years, a significant increase from approximately 7% in June. However, this surge in trading volume doesn't necessarily mean funds are all buying bonds at bargain prices.
High volatility itself amplifies the demand for ETF trading, hedging, and maturity adjustments. However, fund flows are indeed strengthening: ICI data shows that in the week ending September 30, net issuance of US bond ETFs was approximately $20.5 billion; BlackRock previously estimated that fixed-income ETFs would attract approximately $292 billion in the first half of 2026.
Firstly, with higher yields, bond coupons and holding returns become more attractive, and the price losses from further interest rate hikes have a thicker yield buffer. Secondly, if future inflation, fiscal risks, or policy expectations ease, longer-duration bonds are more price-elastic to declining yields. The current surge in bond ETF trading essentially reflects investors taking advantage of the unprecedented interest rate volatility of over 20 years to re-trade duration, yield curve, and credit risk.
