Huge U.K. Bond Fund Director Fears High Yield, Em Etf 'Liquidity Blowout', Buys Cds Protection

From ZeroHedge, Oct 22:

Throughout 2018 (as is the norm exterior of an immediate selling climax), HYG (the States of America high yield bond ETF) has traded at a premium to its NAV (underlying cash bond values). Then Oct struck, global liquidity spigots began to dry out upward to a greater extent than apace in addition to high yield bonds were dumped. This pushed HYG into a discount to its underlying equally liquidation needs (hedging) inward the ETF dominated selling the illiquid underlying positions...

And inward Emerging Market Debt, it is a disaster where the relatively liquid ETF is trading at 15% discount to the hugely illiquid underlying EM debt instruments...

And, equally Bloomberg reports, The UK's largest active director confirms an imminent liquidity compaction coming to credit markets.

As bouts of late-cycle volatility prompt fears of an impending race for the exits, Aberdeen Standard Investments - amongst $736 billion assets nether administration - has been switching to products amongst greater liquidity relative to cash bonds, similar credit default swaps. However, virtually notably, Aberdeen's fixed income director Luke Hickman is bucking a tendency that’s taken concur amidst many of his peers: he's shunning exchange-traded bond funds, fearing a "blowout" inward the passive space inside the adjacent 2 years.

“If you’ve been inward the marketplace seat long plenty to shout out back yesteryear blowouts, you lot know that liquidity is key,” Hickmore said...
“High-yield credit in addition to emerging-market ETFs won’t hold upward good placed to handgrip a liquidity crunch.”

And, equally that fearfulness of a liquidity compaction leaks from cash markets to the ETF, it is the CDS markets that stimulate got drib dead a to a greater extent than pop hedging tool for professionals inward recent weeks... (while nosotros notation the apples to oranges comparisons below, the shifts are notable)

And inward Emerging Markets, spell EM CDS markets stimulate got begun to force higher inward risk, the ETF dominated the early on hedging exactly has drib dead extremely expensive (and equally nosotros noted above, at a major discount)...

....MUCH MORE