Stephen Laipply20 June 2025

BlackRock's Global Co-Head of iShares Fixed Income ETFs Stephen Laipply

1Frameworks

11Insights

Listen

Frameworks in this episode

Finance6 steps

Core-Tilt-Active Bond Portfolio

Anchor with low-cost beta, add targeted bonds, then layer active managers

Read →

Insights & moments

The myth-busts, hot takes, explainers, and tools worth keeping.

Myth Buster· 2

Myth Buster17:46

Bond ETFs Do Not Require Forced Redemptions During Market Stress

Critics expected an exchange-traded wrapper around over-the-counter bonds to fail when liquidity vanished. Laipply argues that repeated stress tests showed the opposite: ETF shares continued changing hands on exchange without requiring investors to redeem them for underlying bonds.

ETF shares can trade even when underlying bonds trade poorly
Exchange trading does not force fund redemptions
COVID provided a substantial real-world stress test
Tariff volatility produced record exchange volume

“the exchange keeps trading even if the underlying doesn't.”
Stephen Laipply · 20:07

“Nobody's forced to redeem an ETF. It can just trade on exchange.”
Stephen Laipply · 20:17

#etf structure#liquidity#redemptions#market stress

Myth Buster24:52

A Riskier Portfolio Can Look Skilled Against the Wrong Benchmark

Some active bond managers hold high-yield securities while comparing themselves with an aggregate benchmark containing none. That can make compensation for additional risk look like security-selection alpha, so performance should be assessed against a benchmark closer to the portfolio's actual exposures.

Benchmark choice materially affects reported outperformance
The aggregate benchmark contains no high-yield allocation
Extra credit risk can inflate returns during favorable periods
Risk-matched comparison isolates security-selection value

“sometimes you'll see a manager buy a bunch of high you bonds in their portfolio, not all, but like they'll hold, you know, a large…”
Stephen Laipply · 25:35

“let's get benchmarks that look a little bit closer to the risk you're taking and see what you're actually adding through security selection.”
Stephen Laipply · 26:04

#benchmarks#active management#alpha#credit risk

Explainer· 4

Explainer05:22

Why Mortgages and Callable Bonds Contain Hidden Options

Laipply explains that a mortgage borrower can prepay when rates fall, causing an expected payment stream to disappear for its owner. Companies exercise comparable optionality by calling outstanding debt and refinancing when rates or credit spreads become more favorable.

Mortgage prepayment terminates an expected annuity
Falling rates increase the likelihood that borrowers refinance
Lenders must manage both interest-rate and volatility risk
Callable debt lets companies replace expensive financing

“You have interest rate risk, volatility risk.”
Stephen Laipply · 05:40

“If interest rates fall or credit spreads titan, they can call that debt an issue cheaper debt, right”
Stephen Laipply · 07:20

#optionality#mortgages#callable bonds#risk

Explainer20:25

How One ETF Trade Can Move Hundreds of Bonds at a Penny Spread

An exchange-traded bond ETF allows investors to transact diversified exposure in one trade. Laipply contrasts this with the underlying market, where locating and pricing numerous individual issues remains more difficult even after electronic trading improvements.

Traditional bond trading developed as a dealer-to-dealer voice market
Electronic trading has improved but not eliminated fragmentation
A single ETF can represent hundreds or thousands of bonds
The same utility benefits households and sovereign wealth funds

“you're trading hundreds or sometimes thousands of bonds simultaneously at a penny bit ask on exchange.”
Stephen Laipply · 21:45

“You actually still can't do that in the underlying market.”
Stephen Laipply · 21:54

#bond trading#etfs#spreads#market structure

Explainer37:29

Why Inflation Psychology Can Matter More Than a One-Time Price Shock

Laipply distinguishes a temporary price-level shock from inflation that becomes embedded in expectations. The Federal Reserve's deeper concern is whether policies cause households and businesses to expect persistently higher inflation and behave in ways that make it self-fulfilling.

A one-time price shock is not necessarily persistent inflation
Expectations can influence wage and pricing behavior
The Fed watches whether higher inflation beliefs become embedded
Current inflation is near longer-run historical averages cited in the discussion

“Inflation's really I almost think it's a mind game or an expectations game.”
Stephen Laipply · 37:45

“sometimes that can become sort of a self fulfilling thing.”
Stephen Laipply · 38:52

#inflation#expectations#federal reserve#monetary policy

Explainer45:13

What Tight Credit Spreads Say About the Economy

Investment-grade and high-yield spreads remained tight relative to long-term history despite prominent recession concerns. Laipply interprets this as the credit market endorsing resilient corporate balance sheets and cash flows, while noting that future refinancing at higher yields could change the picture.

Both investment-grade and high-yield spreads were historically tight
Credit markets were pricing continued economic resilience
Companies refinanced and strengthened balance sheets when yields were low
Higher refinancing costs remain a future risk

“the credit markets are telling you that so far they are buying the resiliency story.”
Stephen Laipply · 45:42

“ultimately people will have to refinance, and you know that may be at higher yields.”
Stephen Laipply · 46:04

#credit spreads#economy#corporate debt#recession

Story· 2

Story15:23

Every Bond-Market Crisis Created Another Wave of ETF Adoption

Bond ETFs attracted sophisticated investors by continuing to trade during the financial crisis, smaller market dislocations, COVID, and tariff volatility. Each stress event demonstrated exchange liquidity when parts of the underlying bond market were difficult to transact.

Stress periods produced surges in bond ETF volume
The 2008 crisis first drew significant institutional attention
COVID generated the largest adoption wave described
Scale eventually made the products usable by the largest investors

“every single time you would have one of these stressed markets, you'd see a huge surgeon volumes in BONDYTF trading on exchange that would get…”
Stephen Laipply · 16:31

“What could you trade? You could trade bond ets, you could trade them in size.”
Stephen Laipply · 17:30

#bond etfs#liquidity#market stress#adoption

Story59:30

The Internet-Boom Loss That Taught Laipply Not to Chase

Laipply recalls buying expensive, aggressive mutual funds during the original Internet boom and riding them into losses. His resulting lesson is to maintain a long-term, diversified portfolio, control fees, and avoid pursuing whatever investment is currently hottest.

He chased expensive mutual funds during the Internet boom
The investments subsequently suffered severe losses
Long-term discipline reduces the urge to panic
Broad diversification is effective even when it is socially unexciting

“I chase things. I remember, you know, during the original Internet boom buying some really expensive, racy mutual funds, which I subsequently rode into the…”
Stephen Laipply · 59:47

“don't pay away too much of fees, and definitely don't chase the hot hot thing.”
Stephen Laipply · 1:00:19

#diversification#behavior#fees#market bubbles

Takeaway· 3

Takeaway27:46

A Cheap Bond Is Not an Opportunity Until You Can Actually Buy It

Fragmented fixed-income markets create apparent opportunities, but implementation determines whether investors can capture them. Time spent locating a bond leaves capital in cash, after which the investor must still pay the bid-ask spread.

Bond availability can constrain an otherwise attractive trade
Search time creates an opportunity cost
Transaction costs come after the bond is located
Execution skill is central to active fixed-income investing

“You could see great opportunities, but when you try to act on them, it can be really costly to actually implement.”
Stephen Laipply · 27:46

“The question is are you able to actually move on them and implement them at the right at the right price.”
Stephen Laipply · 28:35

#execution#transaction costs#bond selection#liquidity

Takeaway29:20

A 5% Cash Yield Can Still Leave Long-Term Investors Behind

High money-market yields made investors reluctant to move into longer-term assets, but cash rates reset and cannot lock in today's yield. Laipply says cash remains appropriate for near-term needs, while long-horizon investors risk missing bond opportunities if they wait for a perfect entry point.

Money-market yields created apprehension about reallocating
Cash is suitable for near-term purchases and spending needs
Market yields can move before hesitant investors act
The highest bond yields in roughly two decades reduce the case for waiting

“if you wait too long, the market's going to move past you.”
Stephen Laipply · 29:44

“It might be actually the hardest thing to do is to time the top and yields.”
Stephen Laipply · 32:21

#cash#money markets#market timing#bond yields

Takeaway57:41

Do Not Choose a Markets Career Just Because It Looks Profitable

Laipply advises graduates to test whether they genuinely enjoy markets rather than pursuing finance for status or money. A durable career requires enough intrinsic interest to remain engaged through both good and very bad days, and experimentation may be needed to find the right desk.

Candidates should be able to explain why markets interest them
Profitability alone is a weak reason to choose the career
Sustained curiosity matters during difficult periods
Rotating through different roles can reveal genuine fit

“you have to be honest with yourself about what you like to do.”
Stephen Laipply · 57:53

“Find what you love and be really really honest with yourself.”
Stephen Laipply · 59:02

#careers#finance#self-awareness#markets