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Your Tax Dollars At Work Through the Plunge Protection Team 10/14/22

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19 hours ago, DrStool said:

I'm no expert on bond ETFs and I did not stay at a Holiday Inn Express last night. So I aks this question. In order to maintain a 20 year horizon the fund must structure in such a way older bonds roll off and newer lower priced bonds are added. So there are more bonds in the portfolio. As they redeem older bonds, and buy cheaper bonds wouldn't they need to issue more shares to equate with the price of a 20 year Treasury bond in the market? I don't know. Just aksing. 

If investors were buying the fund, that would show up as cash inflows. Is that reported anywhere. As stock prices fall and bond yields rise, it would not surprise me to see increased inflows. But from my perspective such data is of little value. Because in order to buy the bond fund shares, investors must sell assets, whether fixed income funds, stocks, their house etc. 

The downtrend in bond prices will not end until the Fed again starts buying the bulk of them.  

ETFs do not see any cash inflow. The Authorized Participants simply provide the underlying securities to the ETF in exchange for shares they create. Normally the APs are creating shares when there is arbitrage between underlying and ETF share price. I explain ETFs and how they operate in the latest Spaces with Tom at Palisade Radio.


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