Bond ETFs Winning Safe-Have Tussle

Although U.S. stocks have staged a nice recovery over the past few days, investors have displayed an overt preference for less risky assets this year. That sentiment has bolstered the fortunes of fixed income exchange traded funds as well as gold funds, such as the SPDR Gold Shares (NYSEArca: GLD).

Concerns over a global slowdown weighed on riskier assets and equity markets since the new year began, adding to speculation that the Federal Reserve may hold off on four interest rate hikes this year.

Gold-related assets have been rallying as global volatility helped support safe-haven investments and a weakening U.S. dollar helped prop up the USD-denominated hard asset. While GLD has been a solid performer this year, on its way to adding more than $2.3 billion in new assets, investors are using fixed income ETFs as their safe-haven plays of choice.

As of Feb. 16, six of this year’s top 10 asset-gathering ETFs are bond funds, including the iShares 20+ Year Treasury Bond ETF (NYSEArca: TLT). TLT ranks second on the list, just ahead of GLD. Despite benchmarks Treasury yields nearing record lows, investors may want to stick to government debt securities and bond-related exchange traded funds as more continue to pare bets on further Federal Reserve interest rate hikes.

“Tumult in global stocks and high-yield debt has helped boost gold prices by 13 percent this year through Tuesday. Yet investors are stashing most of their cash in exchange-traded funds investing in Treasuries, even as gains of 2.4 percent lag behind those of the precious metal. The dash into U.S. debt may continue, with banks including Deutsche Bank AG still recommending clients load up on Treasuries,” reports Alexandra Scaggs for Bloomberg.