The equity market has be shaken by a sudden bout of volatility, sending investors out of riskier assets and into safer plays. The shift in investment sentiment has been a huge boon for bond exchange traded funds.
U.S.-listed bond ETF flows were on pace for their biggest month since October 2014, Steve Laipply, Head of U.S. iShares Fixed Income Strategy at BlackRock, said in a note.
U.S.-listed bond ETFs attracted $14.7 billion in new inflows over April, marking their best month of net inflows since October 2014 when bond ETFs brought in $17.3 billion.
Laipply pointed out that while fears of rising rates have largely kept investors on the sidelines over the first quarter, many investors have began allocating toward fixed-income exposure once rates appeared to stabilize with yields on benchmark 10-year Treasuries hovering around the high 2% range.
Fed Helps Strategist That Diminish Risk
Given the rising rate backdrop and the Federal Reserve’s tighter monetary policy outlook, flows have gone into floating rate, shorter maturity and interest-rate hedged bond ETFs, reflecting investors’ growing demand for strategies that diminish rate risk.
Furthermore, the ongoing equity market volatility has pushed investors toward tried-and-true fixed-income plays like iShares Core Aggregate Bond ETF (NYSEARCA: AGG), which saw $4.4 billion in net inflows year-to-date, according to XTF data.
Other notable bond ETF plays that attracted hefty inflows year-to-date due to rising rate risks include iShares 1-3 Year Treasury Bond ETF (NYSEArca: SHY) $5.8 billion, iShares Floating Rate Bond ETF (NYSEArca: FLOT) $2.5 billion, iShares Short Maturity Bond ETF(NYSEArca: NEAR) $717 million and iShares Core 1-5 Year USD Bond ETF (NYSEArca: ISTB) $680 million.
For more information on the ETF industry, visit our ETF performance reports category.