Bond ETFs are experiencing a lot of action as fixed-income investors move around billions of dollars.
Over the past week, there have been a handful of exceptionally large trades that are worth mentioning, mostly covering fixed-income ETFs.
Among the most popular plays, the Schwab Intermediate-Term U.S. Treasury ETF (NYSEArca: SCHR) saw $1.3 billion in net inflows, Schwab U.S. TIPS (NYSEArca: SCHP) attracted $1.7 billion, Vanguard Tax-Exempt Bond ETF (NYSEARCA: VTEB) experienced $211 million in new inflows and Vanguard Mortgage-Backed Securities Index ETF (NYSEArca: VMBS) added $367 million, according to Deutsche Bank.
Treasury Bonds: Safer Investment Preferences
The inflows into Treasury bonds suggest investors are taking a greater risk-off stance as they seek out traditional safe-haven assets. Additionally, the sudden interest in Treasury inflation protected securities may reveal investors’ greater awareness of rising inflationary pressures in an expanding economic environment.
Additionally, these bond ETF plays come from providers, specially Charles Schwab, known for their low investment fees, so the high inflows may also point to investors’ increasing reliance on passive index-based ETFs with dirt cheap expense ratios.
Meanwhile, the iShares 0-5 Year High Yield Corporate Bond ETF (NYSEArca: SHYG) experienced $1.0 billion in net outflows, SPDR Portfolio Intermediate Term Corporate Bond ETF (NYSEArca: SPIB) saw $246 million in outflows, VanEck Vectors Emerging Markets Local Currency Bond ETF (NYSEArca: EMLC) lost $315 million in assets and Vanguard Total International Bond ETF (NasdaqGM: BNDX) shrunk by $447 million.
The risk-off environment has also not been kind toward riskier assets, such as emerging market debt and corporate credit. Furthermore, a strengthening U.S. dollar and higher yields in conservative U.S. government debt have also diminished the attractiveness of foreign debt.
Deutsche Bank also noted that most of the activity occurred last Thursday, Monday and Tuesday.
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