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Vanguard's bond ETF discount exceeds 6%

Fixed income disruptions

Vanguard's BND ETF has surged to nearly 40x average discount.
Vanguard's BND ETF has surged to nearly 40x average discount.
  • James Baxter-Derrington
  • 19 March 2020
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Vanguard has seen its total market bond ETF (BND) suffer from the recent volatility, with its 12 March closing price trading on a 6.2% discount to NAV.

As noted, fixed income market disruptions in the week beginning 9 March caused greater disparity than is typical between the price of bond ETFs and the value of their constituent bonds, leading to this discount.

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Fixed income ETFs tend to trade at a premium, rather than discount, to NAV, with BND's average closing premium totalling 0.17% since its launch in 2007.

Rich Powers, head of ETF product management at Vanguard, noted that discounts of 1-4% had become common across Vanguard's entire fixed income ETF range over the past fortnight.

He added: "Market prices for ETFs can move more rapidly than the net asset value. That is part of the price discovery process."

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  • Vanguard
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  • BND
  • bond ETF
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  • Rich Powers
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  • market dislocation
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