Domestic bond ETFs (exchange-traded funds) have entered a new stage of development.

From surpassing 100 billion yuan in scale in May 2024, to exceeding 800 billion yuan by the end of 2025, and then breaking through the one trillion yuan mark for the first time on September 23 this year, the growth momentum of domestic bond ETF scale has been strong.

This leapfrog development is the inevitable result of multiple factors working in concert, including the improvement of the product supply system, the optimization of the investor structure, and the acceleration of institutional development. It has also left a significant mark on the entry of medium- and long-term funds into the market and the improvement of the bond market risk management system.

Continuous improvement of the product system

First, the continuous improvement of the product system has built a selectable "shelf" for funds with different risk preferences, which is the foundational prerequisite for the growth of bond ETF scale.

Looking back at the development history of domestic bond ETFs, in the early days, market products were relatively limited, mainly consisting of a small number of interest rate bond varieties, with limited choices and a weak market presence.

After several years of innovative layout, bond ETFs have built a richly layered and comprehensively covered product matrix, covering short-, medium-, and long-duration interest rate bonds, high-grade credit bonds, convertible bonds, and other categories.

In particular, new products such as benchmark market-making credit bond ETFs and science and technology innovation bond ETFs have been continuously launched, providing more choices for funds with different durations and risk preferences.

They can satisfy the steady base position allocation needs of medium- and long-term funds such as insurance, annuities, bank wealth management, and trusts, while also adapting to various trading needs of institutions such as public funds and private funds for liquidity management and duration allocation.

Continuous inflow of medium- and long-term funds

Second, medium- and long-term funds have continued to flow in, the investor structure has been continuously optimized, and bond ETFs have gradually become the "ballast stone" of the capital market.

In the past few years, after the net-value transformation of asset management products was completed, institutional investment has placed greater emphasis on asset transparency, liquidity, and risk controllability. Bond ETFs, with institutional advantages such as transparent holdings, on-exchange "T+0" trading, convenient subscription and redemption, and support for pledged repurchase, have gained sustained favor from institutional funds.

Data from the Shanghai Stock Exchange shows that medium- and long-term funds currently hold about 50% of bond ETF scale. Compared with the end of 2024, the holding scale has grown nearly threefold, with a very significant incremental effect.

Since the beginning of this year, the scale of domestic bond ETFs has increased by nearly 200 billion yuan. Among this, funds such as bank wealth management, public FOFs (funds of funds), insurance, and annuities have continued to increase allocation efforts. The concentration effect of leading products is prominent, and the number of ten-billion-yuan-level bond ETFs has increased rapidly.

The influx of a large amount of funds seeking long-term stable returns has also improved the secondary market liquidity of bond ETFs. The improvement in liquidity has further enhanced the attractiveness of the products, forming a positive cycle of "increased fund allocation—improved liquidity—more capital inflow."

Competitive advantages under a low interest rate environment

Third, under a low interest rate market environment, the competitive advantages of bond ETFs have become prominent, making them a high-quality vehicle for steady fund allocation.

Against the backdrop of a declining interest rate center and falling deposit and wealth management yields, many institutions have clearly shifted their allocation thinking, moving from chasing excess returns in the past to prioritizing the stability and liquidity of base positions.

Since the beginning of this year, various institutions have continued to increase bond ETF allocation, incorporating them into standardized base position assets and daily liquidity management tools. Position stability has improved significantly, and long-term allocation attributes have become increasingly prominent.

Taking credit bond ETFs as an example, credit bond ETFs account for 70% of the total scale of bond ETFs and have contributed most of the growth during the year. Funds are more willing to use credit bond ETFs to obtain relatively higher coupon income and liquidity.

From the perspective of supporting mechanisms, credit bond ETFs such as benchmark market-making bond ETFs and science and technology innovation bond ETFs have successively been included in the general pledged repurchase repository, helping large institutions revitalize existing holdings while retaining base positions and locking in coupon returns, greatly improving the turnover efficiency of institutional existing assets.

At the same time, multiple fund managers have actively optimized the bond replenishment cycle, effectively compressing the time funds are tied up, reducing uncertainty in cross-period operations, and making investor subscription and redemption costs more controllable.

Standing at a new starting point of one trillion yuan in scale, in the future, competition in the bond ETF market will focus more on first-mover advantages in segmented tracks, market maker resources, and institutional channel capabilities.

As the capital market system continues to improve, bond ETF products continue to innovate, and channels for medium- and long-term funds to enter the market become increasingly smooth, domestic bond ETFs are expected to further play the role of a "connector"—guiding long-term capital to settle in the capital market on one hand, and serving financing for key areas of the real economy on the other, creating greater value for the capital market in serving the real economy.

A MACD golden cross signal has formed, and these stocks are rising well!