In its latest Federal Open Market Committee meeting announcement, the Fed hinted at an interest rate hike in December. While higher rates would typically weigh on debt securities and cause fixed-income investors to head for the exits, bond ETF investors remained unperturbed and continued to pile into riskier bond ETFs during the last week of October. Meanwhile, safer plays, such as the
Corporate bond ETFs brought in half a billion dollars in the final three sessions of the month, which suggests that traders don’t believe the Fed will make good on a rate hike this year or people may be just playing chicken with the Fed, riding out higher-yielding, fixed-income assets for as long as they can. [The Fed Can’t Faze Junk Bond ETFs]
The later possibility may seem more likely, with some dumping short-term Treasury bond ETFs ahead of a potential rate hike as short-term Treasury yields inched higher. For instance, the iShares 3-7 Year Treasury Bond ETF (NYSEArca: IEI) saw $511.3 million in outflows over October while the iShares Short Treasury Bond ETF (NYSEArca: SHV) shrunk by $507.3 million, according to ETF.com.
For more information on asset flows, visit our ETF Performance Reports category.
Max Chen contributed to this article.