Thanks to an ongoing bout of global equity market volatility, fixed income exchange traded funds have been popular with investors during the third quarter.
Six of the current quarter’s top 10 asset-gathering ETFs are bond funds, a group that includes the iShares 7-10 Year Treasury Bond ETF (NYSEArca: IEF). With over $2 billion in third-quarter inflows, IEF is the second-best asset gatherer among all bond ETFs this quarter.
Dwindling inflation expectations has bolstered demand for long-term maturities. The spread between two- and 30-year securities dipped for a fourth day after contracting to as little as 208 basis points Monday, the least since April 28, Bloomberg reports.
Long-term Treasuries have strengthened and yields dipped on the continued decline in oil prices helped push down inflationary pressures. Meanwhile, short-term Treasury yields have been anchored as speculators bet on a slow interest rate hike from the Federal Reserve. [Good News for Treasury ETFs]
Low inflation also preserves the value of fixed-income assets and lift real yields.
Diminish expectations that the Federal Reserve will boost borrowing costs next week are also helping prop Treasury ETFs like IEF as are eager foreign buyers of U.S. government debt.