Which Fixed Income ETFs Stand Out in the Current Environment?

Uncertainty around interest rates, inflation, and the possibility of recession are top of mind as advisors allocate to fixed income ETFs.

Most investors are staying within the short to intermediate part of the curve, opting for balanced fixed income exposure as opposed to making big bets.

“The front end of the curve — even if you believe a recession is coming — is a much better risk/reward,” Jason Bloom, Invesco’s head of fixed income and alternatives ETF Product Strategy, told VettaFi. “If a recession isn’t coming and inflation isn’t going to cooperate over the next year, you’re way better off than you are with all that risk at the long end of the curve.”

Bloom said BulletShares ETFs with two- to five-year maturities look attractive right now. Additionally, investment grade floating rate and investment grade corporate credit present opportunities for investors.

Which Fixed Income ETFs Are Seeing the Most Investor Interest?

The Invesco BulletShares 2025 Corporate Bond ETF (BSCP) has seen the greatest four-week net flows across Invesco’s range of fixed income ETFs. BSCP has seen $107 million over four-week period, bringing year-to-date flows to $776 million.

Next, the Invesco BulletShares 2026 Corporate Bond ETF (BSCQ) has seen $58 million in net flows over a four-week period. The fund has accreted $384 million year to date.

The Invesco Investment Grade Defensive ETF (IIGD) has seen $31 million in net flows over a four-week period. Notably, the $128 million fund has about doubled in size since January 1.

Coversely, the funds seeing the largest outflows over a four-week period include the Invesco BulletShares 2023 Corporate Bond ETF (BSCN) and the Invesco BulletShares 2024 Corporate Bond ETF (BSCO).

The Invesco Treasury Collateral ETF (CLTL) and the Invesco Emerging Markets Sovereign Debt ETF (PCY) have seen $54 million and $32m in net outflows over a four-week period. The outflows are relatively insignificant compared to the size of the two funds, however. CLTL and PCY have $1.3 billion and $1.5 billion in assets under management.

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