The shaky markets continue to cause new and unexpected changes in the investing world. In a long feature article
's Richard Shaw argues "no-load, low-expense bond mutual funds [are] currently more attractive than their ETF cousins" thanks to an apparent break-down in some bond ETF categories' mechanics.
"ETFs with broken arbitrage mechanisms can trade at substantial discounts and premiums to NAV, much like closed-end funds ... Arbitrage is clearly not functioning properly for some bond types in this current difficult credit market," Shaw writes. "Only sovereign U.S. treasuries, mortgage-backed securities (agency debt) and the aggregate bond (with lots of Treasury and guaranteed agency debt in it), earned green shading [i.e. 'expected premium discount behavior']."
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