Exchange traded fund investors are dumping Treasury bond exposure at their quickest pace in over a year ahead of rising expectations for the Federal Reserve’s first interest rate hike in almost a decade.
In November, among the top ETF redemptions, the iShares 1-3 Year Treasury Bond ETF (NYSEArca: SHY) saw $1.4 billion in net outflows, SPDR Barclays High Yield Bond ETF (NYSEArca: JNK) experienced $1.0 billion in outflows, iShares 7-10 Year Treasury Bond ETF (NYSEArca: IEF) lost $805 million in outflows, SPDR Barclays 1-3 Month T-Bill (NYSEArca: BIL) saw assets drop by $552.8 million and iShares 20+ Year Treasury Bond ETF (NYSEArca: TLT) saw $419.5 in outflows, according to ETF.com. [Bond ETFs, Duration, Maturity, and Rising Rates]
Money managers redeemed $4.1 billion from U.S. fixed-income funds in November, the most since September 2014, reports Wes Goodman for Bloomberg. [Bond ETF Outflows Picking Up]
Meanwhile, Treasury bonds declined 1.1% over the past month, the worst performer among 26 bond markets tracked by Bloomberg and the European Federation of Financial Analysts Societies. Over the past month, IEF dipped 0.9% and TLT fell 2.1%.
Meanwhile, the benchmark 10-year Treasury yield was hovering around 2.22% Monday.
The weakness in Treasuries reflects growing concerns that the fixed-income market is vulnerable to a tightening monetary policy, which many anticipate the Fed will begin at mid-December – the futures market anticipates a 72% chance the Fed will hike rates by its December 15-16 meeting.
“People are a little bit nervous,” Roger Bridges, chief global strategist for interest rates and currencies at Nikko Asset Management Australia, told Bloomberg. “I could see rates going up as we go into December, but I don’t really see a massive selloff.”
For more information on Treasuries, visit our Treasury bonds category.
Max Chen contributed to this article.