The biggest bond-related ETF experienced a record one-day withdrawal after the global fixed-income market witnessed a swift plunge in response to the Treasury bond retreat.
The iShares Core US Aggregate Bond ETF (NYSEArca: AGG), which tracks the investment results found in the Bloomberg Barclays U.S. Aggregate Bond Index, recorded a record daily outflow of almost $2 billion on Tuesday, its largest one-day redemption since the ETF began trading in 2003, the Financial Times reports.
The single day withdrawal may be associated with one large player calling it quits as outflows from other big bond ETFs have moderated this week. EPFR Global data revealed that more than $8.1 billion was yanked out of bond mutual funds and ETFs in the 14 days ended October 3.
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Nevertheless, AGG remained a popular ETF play this year as investors funneled some $2.9 billion into the fund year-to-date, according to XTF data.
Bond Market on Retreat
The bond market has been on the retreat ever since Treasuries sold off on expectations o further rate hikes as strong economic data supported a tighter Federal Reserve monetary outlook. The recent tax reforms has helped push employment rate to its lowest in half a century, consumer confidence to its highest level since 2000 and service sector activity to its greatest since 1997.
In response to the better economic status and potential for the Fed to step in, the Bloomberg Barclays Multiverse index, a broad gauge of the global debt market, saw more than $900bn erased in value last week. The benchmark has lost more than $2.5tn of its value so far this year as bond investors anticipated central banks cutting back on their post-crisis stimulus and raising interest rates.
“It was not a good week,” John Vail, chief global strategist at Nikko Asset Management, told the Financial Times. “It felt like a breakout from the long downward trend in bond yields we’ve had over the past 30 years.”
For more information on the fixed-income market, visit our bond ETFs category.