Ten-year Treasury yields climbed 6.1% to 2.14% Tuesday, extending a run that has seen the yield on the benchmark U.S. government bond climb nearly 19% over the past month.
Broadly speaking, that should not be good news for fixed income exchange traded funds, particularly those with longer durations, but investors have continued pumping money into bond ETFs in 2015 after a record year of flows to the asset class in 2014.
Through Feb. 12, investors poured $19.6 billion into bond ETFs this year, according to iShares, helping place five bond funds on the top 10 list of ETFs for year-to-date inflows. Last year, the Vanguard Total Bond Market ETF (NYSEArca: BND) and the iShares Core U.S. Aggregate Bond ETF (NYSEArca: AGG) were among the top 10 asset-gathering ETFs.
The iShares iBoxx $ High Yield Corporate Bond ETF (NYSEArca: HYG), the largest high-yield bond ETF, has added $2.4 billion in new assets this year while the iShares Short Treasury Bond ETF (NYSEArca: SHV) has grown by $2.2 billion. The bulk of SHV’s 2015 inflows occurred in a single day earlier this month. [Big Inflows for Short-Term Bond ETF]
Many investors have turned to ultra-short-duration bond ETFs to hedge against rising rates. Additionally, others are using the ETFs as a money market or cash alternative. However, short-duration bond yields are rising as market observers anticipate the Fed is moving closer to raising interest rates later this year.
On a combined basis, iShares bond ETFs have pulled in $12.2 billion this year, according to the issuer.
The iShares iBoxx $ Investment Grade Corporate Bond ETF (NYSEArca: LQD), iShares 7-10 Year Treasury Bond ETF (NYSEArca: IEF) and the SPDR Barclays High Yield Bond ETF (NYSEArca: JNK) are also among the 10 best asset-gathering ETFs this year.