Not surprisingly, in a positive week for equities SPY took in nearly $10 billion and IWM nearly $2 billion, as managers benchmarked to these indexes likely sought quick and liquid long exposure in the face of this rally. Also, hedging and options related activity and the usage of such broad instruments should not be discounted since this was an options expiration week.
From a sector standpoint we continued to see bullish call buying in Financial Select Sector SPDR Fund (NYSEArca: XLF) and a related ETF, SPDR KBW Bank ETF (NYSEArca: KBE), despite the fact that the path of XLF has been every which way since this call buying began a few weeks back. On the heels of this, XLF saw respectable creation activity as well.
Notable outflows on the week include iShares MSCI Emerging Markets (NYSEArca: EEM), but on the flipside, Vanguard Emerging Markets (NYSEArca: VWO) took in new assets so it is possible that investors are enacting swaps for various reasons from one ETF to the other.
Also, volatility linked ETNs including iPath S&P 500 VIX Short Term Futures ETN (NYSEArca: VXX) and VelocityShares Daily 2X VIX Short-Term ETN (NYSEArca: TVIX) saw net outflows to a considerable degree last week which is not particularly surprising given the equity market run, and thus those that had “volatility hedges” on via such ETNs were largely unwinding these hedges as the equity market begins to stabilize.
To support this activity, we saw put action in VXX earlier in the week (and at higher levels in VXX) as the VIX itself fell over the course of the week from as high as 43.18 to ultimately close at 30.98 on Friday.
Similarly, SPDR Barclays Capital 1-3 Month T-Bill (NYSEArca: BIL) and iShares Barclays Short Treasury (NYSEArca: SHV) saw outflows this week as well, and these ETFs are normally thought of as stable cash vehicles that institutional investors will use to park their assets when transitioning between investments. That said, flows out of such products gives us an indication that these same managers are funneling money back into equities as their confidence is gradually restored.
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