With 10-year Treasury yields up 6.2% over the past month, it is not surprising that investors would want to flee longer-dated bond exchange traded funds. They are doing just that.
For the week ended June 8, investors pulled nearly $319 from the iShares 20+ Year Treasury Bond ETF (NYSEArca: TLT), making TLT the seventh-worst ETF in terms of lost assets for that period. Four of the 10 worst ETFs outflows for that period were fixed income funds. [Bearish Bond ETFs Back in Style]
That only scratches the surface of the struggles recently encountered by some fixed income ETFs as markets continue pricing in the specter of an interest rate hike by the Federal Reserve following the central bank’s October meeting.
TLT “saw investors withdraw $1.7 billion of cash in the six weeks ended June 5. That was nearly 30 percent of its market capitalization, and the worst six-week string of outflows since its 2002 inception. The exodus left it with a net $1.8 billion of outflows so far this year, the most of any bond fund,” reports Alexandra Scaggs for Bloomberg.
TLT is the only bond ETF on the list of the top 10 offenders for year-to-date outflows and those outflows come as institutional investors increase usage of fixed income ETFs. Data suggest professional investors continue gobbling up fixed income ETFs. The study, Bond Market Challenges Continue to Drive Demand for Fixed-Income ETFs, conducted by BlackRock’s (NYSE: BLK) iShares unit, the world’s largest ETF sponsor, and Greenwich Associates, notes that bond ETFs are taking on increasingly important roles in institutional portfolios. [Big Demand for Bond ETFs]
“Based on the study, growth of ETF usage is expected to be robust. One-quarter of the institutions in the study—and 40% of the investment managers—plan to increase their use of bond ETFs in the coming 12 months, while none of the respondents said both more common among institutional investors and more important within institutional portfolios.