After the Federal Reserve stated it was standing pat for the time being in and riskier assets began to rally off the recent selling, U.S. corporate bond exchange traded funds saw their largest monthly inflows ever.
U.S. corporate debt-related ETFs saw $8.3 billion in inflows over October, reports Eric Balchunas for Bloomberg.
High-yield corporate bond ETFs took in the lion’s shares, attracting $5.6 billion and breaking their previous one-month record. The most popular junk bond ETFs include the iShares iBoxx $ High Yield Corporate Bond ETF (NYSEArca: HYG), which added $2.5 billion, and SPDR Barclays High Yield Bond ETF (NYSEArca: JNK), which brought in $2.7 billion.
Investors have largely been dumping debt-related ETFs this year, with junk bond ETFs experiencing half a billion in outflows until October.
Additionally, investment-grade corporate bond ETFs also booked a record $4.8 billion in inflows, led by iShares iBoxx $ Investment Grade Corporate Bond ETF (NYSEArca: LQD), which took in $2.6 billion, its largest monthly inflow to date.
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.