A new report from the BlackRock Investment Institute looks at exchange-traded products in detail.

Financials dominate investment grade ETPs with a 39 per cent share, almost triple the level of the next biggest group, consumer non-cyclicals. But high yield ETPs hold a more diverse bag of bonds, with communication firms the largest share in the sector at just over one fifth.

Brazil, Mexico and Russia are the top three countries held by emerging market debt ETPs. And index membership seems to be the determining factor for ETPs, not an assessment of the debt itself: of the 11 emerging markets ranked in the top 25 countries of the BlackRock sovereign risk index, only three – South Korea, Russia and the Philippines – feature in the ETP top 10 list.

Foreign currency appreciation provided 60 per cent of total returns of emerging market debt in the past eight years but was responsible for 75 per cent of the risk.

Remarkably, inflows into fixed income ETPs typically do not seem, on the fairly brief experience to date, to reverse when rates start rising. Data from the last four years suggest that when yields rise, the impact on overall ETP flows has been slight, although inflows did slow in the most recent period, BlackRock points out.

Over the last three years exchange trading almost tripled in emerging market debt and high yield - and doubled in investment grade. But liquidity in underlying markets is described by BlackRock as spotty. Contrary to popular belief, the firm says, much of fixed income ETP trading does not necessarily trickle through to the OTC bond markets.

Of all the bond market sectors it is in high yield where ETPs have the highest share of the market, and that still stands at just 3 per cent.