We know junk-bond funds have been one of the fastest-growing parts of the ETF business this year -- but a new Bloomberg story shows just how much of that growth is coming from traders looking for liquidity.

Reporter Lisa Abramowicz writes that junk-bond ETF trading is increasing at a faster pace than trading in the underlying bonds, with the daily average volume for the three biggest ETFs totaling $588 million, or over 10 percent of the daily trading of the underlying bonds. This is a 90 percent increase from 2011.

"Institutional investors are turning to [junk-bond ETFs] as a more efficient way in and out of a market that traditionally trades in private, over-the counter transactions," Abramowicz writes.

Barron's writer Michael Aneiro picked up on the Bloomberg story, and wrote in a blog post that the rising trade in junk ETFs is a "market distortion" caused by the "continuing rush into junk bonds." 

Edited by: Chris Cumming


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