The February issue of our Bond Fund Intelligence, which was sent to subscribers Friday a.m., features the articles, "Cerulli on Fixed-Income ETF Product Development, Growth," which excerpts from a paper on bond ETF trends; and "Franklin Templeton's Driscoll on Ultra Short Duration," which covers a recent interview. BFI also recaps the latest Bond Fund News and includes our Crane BFI Indexes, which show that bond fund returns jumped while yields declined in January. We excerpt from the new issue below. (Contact us if you'd like to see our latest Bond Fund Intelligence and BFI XLS spreadsheet, or our Bond Fund Portfolio Holdings data, and join us for our upcoming Bond Fund Symposium, which is March 19-20 in Boston, Mass.)
BFI's lead article states, "Cerulli Associates published a paper titled, 'Fixed-Income ETF Use and Product Development Efforts Accelerate.' They write, 'Fixed-income ETFs have experienced steady growth in recent years, with assets in taxable fixed-income ETFs increasing from $1.2 trillion in 2022 to nearly $2 trillion at the end of 3Q 2025. Tax-free fixed-income ETFs increased from $106 billion to $165 billion at the end of the third quarter. In the last three years, more than 300 new fixed-income ETFs were developed and the expectation that the products will significantly influence future flows is fueling rapid product development in both passive fixed-income ETFs and, even more so, active solutions.'"
It continues, "The overview says, 'The growth in fixed-income ETF use is driven by several factors, including greater advisor familiarity with using ETFs for fixed income, a more favorable interest rate environment, and the development of a more diverse set of fixed-income ETF solutions by issuers.'"
Our "profile" article states, "Franklin Templeton posted an interview with Putnam Ultra Short Duration Income Fund's Head of Short-Term Liquid Markets Joanne Driscoll titled, 'Capital Preservation With Purpose: Inside Our Ultra Short Duration Strategy.' She tells us, 'At Franklin Templeton Fixed Income, we offer a comprehensive set of fixed income solutions backed by a team of specialized investment professionals skilled in navigating diverse market conditions. We are committed to pursuing consistent, predictable fixed income results for our clients by delivering a measured, no surprises approach.'"
It continues, "Driscoll explains, 'As part of my role, I oversee and manage our cash management, money market, and ultra-short businesses, which represent nearly 40 billion in assets under management. I'm here today to share an overview of our ultra-short duration capabilities, which we believe are differentiated in the marketplace. For background, the ultra-short bond category gained traction in the marketplace following the global financial crisis, and particularly after the U.S. Securities and Exchange Commission passed the first round of money market reform in 2010.'"
Our first News brief, "Returns Jump, Yields Fall in January," states, "Bond fund returns were higher in January and yields were lower. Our BFI Total Index rose 0.45% over 1-month and rose 6.16% over 12 months. (Money funds rose 3.96% over 1-year as measured by our Crane 100 Index.) The BFI 100 increased 0.38% in Jan. and rose 6.77% over 12 mos. Our BFI Conservative Ultra-Short Index was up 0.36% over 1-month and 4.71% for 1-year; Ultra-Shorts rose 0.35% and 4.85%. Short-Term gained 0.35% and 5.80%, and Intm-Term rose 0.38% in Jan. and 7.29% over 12 mos. BFI's Long-Term Index was up 0.25% and up 7.04%. High Yield returned 0.40% in January and 6.73% over 12 months."
A second News brief, "Morningstar on 'How Muni-Bond Funds Navigated a Bumpy Ride in 2025.' They write, 'The municipal-bond market delivered inconsistent returns over 2025, with performance pressured early in the year by uncertainty around federal tax legislation, heavy new-issue supply, volatility around tariffs, and seasonal selling.... Performance improved in August as prices were boosted by interest rate cuts and a moderation in new issues. Solid demand was met by more restrained issuance, turning mutual fund flows positive and bringing spreads tighter, which supported stronger total returns toward the end of the calendar year.'"
Another brief states: "SSIM Writes in Its, 'Q1 Bond Market Outlook for ETF Investors,' 'Th[e] combination of growth potential and heightened sensitivity to downside risks underscores the need for careful positioning as policy and market conditions coalesce. And with tight credit spreads, elevated yields, and policy normalization, fixed income returns are likely to rely more on income and carry than on beta. In this environment, investors should focus on: High-quality exposure in the short-to-intermediate part of the curve to help capture carry and roll-down while managing reinvestment risk and limiting reliance on further spread compression [and] Active, bottom-up strategies to seek opportunities when volatility emerges and issuer outcomes diverge.'"
A BFI sidebar, "Best Bond ETFs to Buy," says, "Kiplinger's writes about 'The Best Bond ETFs to Buy.' They tell us, 'Many investors are still cautious about fixed income after the 2022 bond bear market. That year, aggressive rate hikes from the Federal Reserve caused prices on many bond ETFs to plunge, especially those with longer maturities. The memory of bonds falling alongside stocks left a mark.'"
Finally, another sidebar, "ETF.com: Bond ETFs Stumble," states, "ETF.com says, 'Bond ETFs Stumble as Rate Cut Hopes Fade and Policy Risks Mount.' The article comments, 'Bond ETFs are getting off to a rocky start in 2026 as expectations for Federal Reserve rate cuts give way to renewed geopolitical and policy-related uncertainty. Since the start of the year, the yield on the 10-year Treasury has risen from 4.17% to 4.27%, its highest level in ... five months. The 30-year yield has moved higher as well, climbing from 4.81% to 4.91%.'"
