Amidst the Brexit induced shakeup, speculative-grade high-yield bond exchange traded funds attracted huge inflows as an extended low-rate outlook bolstered the case for yield-generating assets.
Following the United Kingdom’s Brexit tally, investors piled $291 million into the iShares iBoxx $ High Yield Corporate Bond ETF (NYSEArca: HYG), reports Rachel Evans for Bloomberg. Over the past week, HYG attracted $1.5 billion in net inflows.
“A lot of it is yield-seeking investors,” Karen Schenone, fixed-income strategist at BlackRock Inc.’s iShares unit, told Bloomberg. “The Fed hike has been completely priced out for 2016.”
HYG shows a 6.41% 30-day SEC yield. Meanwhile, yields on benchmark 10-year Treasury notes were hovering around 1.48%.
The Brexit vote came just eight days after the Federal Reserve signaled lower expectations for an interest rate hike ahead of the uncertainty over the U.K. referendum and the ongoing speculation surrounding the U.S. presidential run in November.
Related: U.S. Junk Bond Market, ETFs Are Enticing Foreign Interest
Adam Patti, chief executive officer of IndexIQ, New York Life Insurance Co.’s exchange-traded-fund unit, argued that bond ETFs will likely continue to benefit in the weeks ahead on increased volatility and the upcoming presidential election.
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