ETF Trends
ETF Trends

U.S. Treasury exchange traded funds enjoyed large gains in 2011 as investors fretted over deflation and the Eurozone debt crisis. However, corporate bonds could lead the way this year in fixed-income ETFs if investors regain their appetite for risk.

ETFs tracking corporate bonds include iShares iBoxx Investment Grade Corporate Bond ETF (NYSEArca: LQD), iShares 1-3 Year Credit Bond (NYSEArca: CSJ) and Vanguard Short-Term Corporate Bond ETF (NasdaqGM: VCSH).

Total assets under management for U.S. fixed-income ETFs gained about $41.3 billion, or a 29% growth increase for 2011, according to BlackRock data. [Treasury ETFs Lead 2011]

Due to the slow economic growth in the U.S. and heightened volatility, investors searched for defensive sectors and safe havens. Investors that took a buy-and-hold strategy to Treasury bond ETFs were rewarded in 2011. Market timers that had exited bonds prematurely were penalized on speculation that yields were on the rise. [ETF Chart of the Day: U.S. Treasury Bonds]

As the Eurozone debt crisis is rages on, investors are scared and will continue to seek the safe-haven appeal of the bond market with the benefit of some yield. Investors have taken to funds such as the iShares Barclays TIPS Bond Fund (NYSEArca: TIP), which focuses on Treasury Inflation Protected Securities, and has risen 8.4% in 2011, reports Deborah Levine for MarketWatch.

What’s more, “asset managers and pension plans are using Treasury ETFs to gain exposure to rates” in 2011, reports the iShares blog.

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