The bond market has experienced volatility overall this year, causing a decline in the scale of bond index fund management compared to 2024, while bond ETFs have achieved counter-trend growth. As of March 31, 2025, the management scale of bond ETFs reached approximately 218.1 billion yuan, an increase of over 300% compared to 2022, with their share of passive index bond funds rising from 8.9% at the end of 2022 to 17.8%. A growing number of investors have made their investment choices with real capital. Against the backdrop of the central bank signaling a "timely reserve requirement ratio and interest rate cut" and rising market demand for low-volatility, stable products, this capital migration vividly reflects the stable characteristics and allocation value of bond ETFs.
Based on the type of underlying index tracked, bond ETFs can be divided into three major categories: government bond ETFs, credit bond ETFs, and convertible bond ETFs. Each category can be further subdivided according to specific bond holdings. For instance, government bond ETFs can be broken down into treasury bonds, policy bank bonds, and local government bond ETFs. Credit bond ETFs can be subdivided into corporate bonds, municipal investment bonds, and short-term financing bond ETFs. These two categories dominate the bond ETF market.
Where to start
Credit bond ETFs reached a development turning point at the end of 2024, with the first batch of eight benchmark market-making credit bond ETFs approved on December 31, 2024, and listed intensively in January 2025. Policy support has also been continuous. On March 21, 2025, the China Securities Depository and Clearing Corporation issued a notice clarifying that credit bond ETFs would be included in the bond generic repurchase pledge pool. This move is expected to improve the capital turnover efficiency for credit bond ETF holders, potentially allow them to obtain leveraged returns through pledges, thereby enhancing their appeal to investors and further expanding the overall scale and activity of the credit bond ETF market.
Breaking dual barriers: Liquidity and investment thresholds
Credit bond ETFs effectively solve the pain point of insufficient liquidity in the credit bond market through their collective investment characteristics. They not only provide investors with a new tool for capturing band returns in an environment where the bond market interest rate center is fluctuating downward and yields to maturity are narrowing, but also significantly lower the investment threshold by issuing fund shares in small denominations. Compared to the traditional interbank market transaction threshold of millions of yuan, individuals and small institutions can participate with only a small amount of capital. Coupled with the risk diversification advantage of holding a basket of credit bonds, investors no longer need to deeply analyze the credit quality of individual bonds, significantly reducing professional operational barriers and opening the door to credit bond investment for a broader range of market participants.
Policy-driven advancement: The rise of Sci-Tech Innovation Bond ETFs
Driven by policy catalysts, the credit bond ETF market reached a turning point for category expansion at the end of 2024. The establishment of benchmark market-making credit bond ETFs and their inclusion in the pledge pool propelled the bond ETF scale to surpass 250 billion yuan by June 2025. As the allocation value of credit bond ETFs continues to be unleashed due to improved liquidity, a more precise sub-sector breakthrough has emerged. On May 7, 2025, Chinese financial regulatory authorities coordinated the launch of a comprehensive policy framework for technology innovation bonds, marking the official start of the "Technology Board" in the bond market. It is reported that several public fund companies have already submitted applications for Sci-Tech Innovation Bond ETFs, awaiting approval. Sci-Tech Innovation Bond ETFs track the Shanghai, Shenzhen, and CSI AAA Technology Innovation Corporate Bond Indices, forming a differentiated layout on the Shanghai and Shenzhen stock exchanges. As an innovative branch of credit bond ETFs, Sci-Tech Innovation Bond ETFs not only retain the risk-return characteristics of credit bond ETFs but also deeply integrate bond investment with the development of new productive forces by focusing on financing for technology fields such as chips and new energy. This product evolution from credit bond ETFs to Sci-Tech Innovation Bond ETFs reflects the policy's targeted guidance for technology finance and, through the innovation of index investment tools, provides investors with a new fixed-income scenario for sharing in the growth dividends of tech enterprises.
Once approved, Sci-Tech Innovation Bond ETFs will pioneeringly fill the market gap in the field of tech finance bond funds, enrich the product matrix of bond index funds, and promote the scale expansion and structural optimization of the bond ETF market. Driven by multiple favorable factors, including the continued release of policy dividends, steady market expansion, improving liquidity environment, and an increasingly diverse investor base, Sci-Tech Innovation Bond ETFs may usher in unprecedented development opportunities. The innovation pace of the bond market is resonating with national strategies. Against the backdrop of market volatility and growing demand for stable investments, credit bond ETFs are expected to continue releasing their innovative momentum, further reshaping the bond investment ecosystem and bringing more room for imagination and allocation opportunities for investors and market participants. Looking ahead, Sci-Tech Innovation Bond ETFs are poised to leverage their unique asset attributes and policy advantages to continuously broaden investors' allocation boundaries, while injecting more financial resources into technology innovation companies, becoming a key link connecting the capital market with the development of new productive forces and writing a new chapter in the field of bond investment.