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Inflation has moved up recently, but Sam Stovall, U.S. strategist for S&P Global Market Intelligence, thinks Fed officials want to make sure the gains are sustainable. S&P Global continues to expect the next rate hike of 25 basis points to come in June.
In April, U.S. broad market investment-grade bond ETFs and U.S. corporate investment-grade bond ETFs gathered $1.9 billion and $1.4 billion of fresh money, respectively. iShares Core US Aggregate Bond (NYSEArca: AGG) pulled in $885 million, while Vanguard Total Bond Market Index ETF (NYSEArca: BND) added $834 million; both broad market bond ETFs hold a mix of agencies, investment grade corporates, mortgages, and Treasury bonds.
[related_stories]Meanwhile, iShares iBoxx Investment Grade Corporate Bond (NYSEArca: LQD) had net inflows of $1.4 billion last month, making it the second most popular ETF in the industry behind SPDR S&P 500 (NYSEArca: SPY). LQD recently had 44% of its assets in bonds rated BBB or equivalent, with the remainder rated even higher investment grade.
According to S&P Global Ratings Services, the investment-grade composite credit spread was 198 basis points at the end of April, 20 basis points narrower than the 218 basis points a month earlier.
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Among bonds rated BBB, the spread tightened 24 basis points reflecting, according to S&P Global Market Intelligence, the higher demand for bonds with moderate credit risk.
In contrast, investors collectively sold some of the purer Treasury bond ETFs in April they purchased earlier in the year. U.S. government Treasury intermediate- and short-term ETFs shed $1.3 billion and $1.2 billion, respectively, of their assets last month. Through the first four months of the year, Treasury intermediate-term products had $1.5 billion of inflows, while short-term ones had $1.0 billion in net outflows.