- U.S. government bond exchange traded funds among one of this year’s hottest asset classes
- iShares 3-7 Year Treasury Bond ETF (NYSEArca: IEI) added $1.06 billion in inflows
- iShares 20+ Year Treasury Bond ETF (NYSEArca: TLT) brought in $854.9 million
The Federal Reserve did several corners of financial markets a good turn Wednesday when it opted against raising interest rates. Further bolstering the case for U.S. government bond exchange traded funds, one of this year’s hottest asset classes is the fact that the market participants are now betting the Fed will raise rates at most twice this year.
That is down from expectations of four rate hikes heading into 2016. Economic growth concerns and spike in market volatility diminished the outlook for further Federal Reserve rate hikes, adding to demand for fixed-income assets. Moreover, the sudden spike in risk helped push investors into safe-haven U.S. Treasury ETFs, which saw assets surge $4.7 billion in February. For instance, the iShares 3-7 Year Treasury Bond ETF (NYSEArca: IEI) added $1.06 billion in inflows and the iShares 20+ Year Treasury Bond ETF (NYSEArca: TLT) brought in $854.9 million.
Year-to-date, TLT, which is highly sensitive to changes in interest rates, is up nearly 7%. With the Fed standing pat and the ETF’s chart looking promising, some technical analysts see more upside on the way for the popular bond fund.
“Zooming out a bit, we can see that the spike high on the treasury bond ETF in February matched that of last year. This raises the potential for a double top. If the $TLT has any shot at testing those highs/making new highs, it needs to breakout above the declining trend line in the chart above. Any move higher would likely coincide with some renewed pressure on stocks,” according to See It Market.
According to FactSet data, iShares U.S. fixed income ETFs attracted $7 billion in net assets over February while the broader industry brought in $9 billion, writes Todd Rosenbluth, S&P Global Market Intelligence Director of ETF Research, in a note.