What is going on with NEAR (iShares Short Maturity Bond ETF)?

[Ross812]

This is down 7.45% today... Is there a major bankruptcy I don't know about? I looked through the holdings and can't figure it out.

[Cevian]

I've been looking at this for the past 24 hours. Have a look at FLOT, XFR.TO. Same thing.

 

There is a major credit and liquidity problem in the market that not many people are talking about. While investors are trying to redeem these types of ETFs, the underlying securities are frozen and can't be redeemed with such speed. A large discount has appeared between price and NAV, which I'm hoping will be resolved naturally via the market mechanism.

[Ross812]

Yeah,

 

I am really confused. I have checked every one of the bonds i can find and they seem healthy. I bought sold MINT and bought more NEAR at $44.8.

[Ross812]

I've been looking at this for the past 24 hours. Have a look at FLOT, XFR.TO. Same thing.

 

There is a major credit and liquidity problem in the market that not many people are talking about. While investors are trying to redeem these types of ETFs, the underlying securities are frozen and can't be redeemed with such speed. A large discount has appeared between price and NAV, which I'm hoping will be resolved naturally via the market mechanism.

 

You were right, the NAV as of the close yesterday was $48 and it traded between $44.5 and $45.5. It seems like a pretty low risk way to make 5 to 6% in short order as the price of the ETF converges on NAV once selling pressure subsides.

[Jurgis]

I've been looking at this for the past 24 hours. Have a look at FLOT, XFR.TO. Same thing.

 

There is a major credit and liquidity problem in the market that not many people are talking about. While investors are trying to redeem these types of ETFs, the underlying securities are frozen and can't be redeemed with such speed. A large discount has appeared between price and NAV, which I'm hoping will be resolved naturally via the market mechanism.

 

You were right, the NAV as of the close yesterday was $48 and it traded between $44.5 and $45.5. It seems like a pretty low risk way to make 5 to 6% in short order as the price of the ETF converges on NAV once selling pressure subsides.

 

You are assuming price is gonna go up to NAV rather than NAV is gonna go down to price. This is far from assured.

[Cigarbutt]

This reminds me of a very interesting discussion with muscleman about money market funds and breaking-the-buck episodes.

I just rapidly looked at the composition of NEAR and the asset "quality" seems reasonable so the price movements seem to reveal a very unusual degree of liquidity stress in bond funds.

Somebody looked at this ETF price "right" or "wrong" conundrum:

https://www.realclearmarkets.com/articles/2020/03/19/beware_the_fed_overpaying_and_subsidizing_bad_bets_104093.html

You don't need to focus on the anti-Fed or moral hazard aspect of bailouts contained in the article.

 

Personal (potentially irrelevant) anecdote:

I had built a position in WYDE (an ETF "betting", through a derivative framework related to credit default swaps, against high yield debt). I was also looking to benefit from liquidity stress that could have occurred. Last August (2019), the fund was liquidated. When I inquired (and complained), I got the following feedback: There was insufficient interest at the retail level and there were no signs that the interest would shift in the foreseeable fututre. LOL

[Cevian]

Good to see the difference on XFR.TO closing today. I had to second guess myself and analyse the entire portfolio in the ETF overnight so I could sleep easy. Very solid, mostly Crown Corp, unlike it's US counterpart.