The iShares iBoxx $ Investment Grade Corporate Bond ETF (NYSEArca: LQD) is already the largest investment-grade corporate bond exchange traded fund and it got bigger as investors flocked to the ETF last week.
Yield-starved investors have been flocking to corporate bond ETFs as a result of the recent fall off in global yields, which has made yields in U.S. assets relatively more attractive – some $12 trillion in global debt now trades with negative yields.
Related: U.S. Corporate Bond ETFs Among Few Attractive Investment-Grade Options Left
“To get a sense of the momentum, take a look at LQD. The iShares iBoxx Investment-Grade Corporate Bond ETF, or LQD, as it’s also known, is the world’s second-largest bond ETF and it took in $1.1 billion of new funds on Thursday. That’s its biggest daily inflow ever and the largest ever recorded for a corporate bond ETF, according to data compiled by Bloomberg,” reports Alastair Marsh for Bloomberg.
Big inflows into LQD this month come after investors poured into investment-grade and junk bond ETFs in June. Specifically, iBoxx backed ETFs experienced a record $27.6 billion of exchange traded volume in June, and the assets under management of iBoxx-benchmarked ETFs now stand at a record $107 billion.
[related_stories]Foreign yields are being depressed by stimulus measures employed by global central banks, such as the Bank of Japan and the European Central Bank, which began buying investment-grade corporate bonds as a part of its quantitative easing program to stimulate the Eurozone economy.
As many ETF observers have noted, volume begets volume. These ETFs that track notoriously illiquid markets have been growing in popularity as investors sought out liquid instruments to express their views on the fixed-income market. While trading volumes in the fund have increased, trading in the underlying debt market has not been particularly elevated, reflecting the increased usage of ETFs as a more liquid proxy for exposure.
Related: 28 ETFs for Investment-Grade Corporate Bond Exposure
“Global fixed-income ETFs, which track bond indexes and trade like stocks, attracted $66.7 billion of inflows this year, according to data compiled by BlackRock Inc. That puts the market on pace to top last year’s record total of $91.7 billion,” according to Bloomberg.
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iShares iBoxx $ Investment Grade Corporate Bond ETF
Tom Lydon’s clients own shares of LQD.