Overall volumes in exchange traded funds this week were slightly below average, which the bears would point to as an indicator that the early week run-up would eventually run out of steam and revert lower. In fact, this did occur after an early morning rise on Thursday and we finished the week on a sour note on Friday after the bleak nonfarm payrolls report for August, basically giving back an entire week of gains.
From an activity standpoint, usual suspect SPDR S&P 500 (NYSEArca: SPY) led the ETF landscape with over $8 billion in net creations, which is likely a combination of short covering as well as portfolio managers that are uncomfortable selecting individual stocks in a period of such great volatility. They are seeking quick and liquid exposure to the S&P 500 benchmark so as not to miss a pending run-up in U.S. equities.
Friday’s action demonstrated, however, that such gains can be fleeting in our current environment and be quickly erased. In the fixed income space we saw over $300 million flow out of iShares Barclays TIPS (NYSEArca: TIP) as well as iShares Barclays 20+ Year Treasury Bond (NYSEArca: TLT), to the tune of about $250 million, and this continues a theme that began last week with outflows in both funds. Performance has been solid recently in both funds, and TLT actually closed at a new multi year high on Friday, but it seems that investors are taking profits in bonds into the latest rally.
Also in the fixed income space, SPDR Barclays Capital 1-3 Month T0Bill (NYSEArca: BIL) took in over $1 billion in new assets with over 20 million shares trading on Monday of last week, compared with average daily volume of 2.4 million shares. With BIL being made up of low duration U.S. Treasury Bills, we presume that a large institution or institution is migrating to a cash position and waiting out the recent equity market volatility before redeploying.
Also in the fixed income space, we saw additional creation activity in iShares Barclays MBS Bond (NYSEArca: MBB). We saw a large buyer the previous week using the ETF for exposure to mortgage-backed bonds. [ETF Chart of the Day: Mortgage-Backed Securities]
With crude oil prices climbing most of the week before suffering a setback on Friday, flows were positive in energy ETFs, notably Energy Select Sector SPDR Fund (NYSEArca: XLE).