How Investors Are Positioning Fixed Income Portfolios in 2024

Investors are continuing to shift into intermediate and longer-term duration fixed income ETFs in 2024 to date.

While short-term fixed income ETFs were very popular last year, the narrative changed in the past few months. In anticipation of the Fed cutting rates this year, investors are moving into intermediate and longer-term duration as they look to lock in higher yields for longer periods.

The shift in investor appetite in fixed income portfolios can be observed in flows across the BondBloxx suite of ETFs.

Notably, the BondBloxx Bloomberg Ten Year Target Duration US Treasury ETF (XTEN) has seen a surge in net flows as investors look to extend duration. The fund has accreted over $49 million year to date through February 1. To compare, the fund has seen $95 million in net flows over a one-year period.

However, some investors are still looking to treasuries with shorter durations as they prepare fixed income portfolios for the current economic uncertainty. The firm’s largest fund, the $1.1 billion BondBloxx Bloomberg Six Month Target Duration US Treasury ETF (XHLF), has seen $17 million in net flows year to date. The fund took in an impressive $904 million in 2023, its first full calendar year since its September 2022 launch.

Meanwhile, investors are adjusting their fixed income portfolios and moving out of short-term products such as the BondBloxx Bloomberg One Year Target Duration US Treasury ETF (XONE) and the BondBloxx Bloomberg Two Year Target Duration US Treasury ETF (XTWO).

XONE, which saw the second greatest flows in 2023, has seen $125 million in outflows in 2024 to date. XTWO has seen $33 million in net flows during the same period.

How BondBloxx ETFs Fit Into Fixed Income Portfolios

BondBloxx entered the ETF market in early 2022, offering a solution for investors looking for more precise exposures to fixed income securities. The firm now offers a suite of ETFs covering specific slices of the bond market, based on bond type, equity sector and credit rating.

Last week, the firm enhanced its lineup with the addition of a trio of ETFs covering the bottom credit tier of the investment-grade corporate bond market. Each fund targets a different maturity range.

The new funds include the BondBloxx BBB Rated 1-5 Year Corporate Bond ETF (BBBS), the BondBloxx BBB Rated 5-10 Year Corporate Bond ETF (BBBI), and the BondBloxx BBB Rated 10+ Year Corporate Bond ETF (BBBL).

See more: “BondBloxx Adds 3 BBB-Rated Corporate Bond ETFs

Furthermore, the three new ETFs track market-value-weighted indexes from Bloomberg and each charge 19 basis points.

For more news, information, and strategy, visit the Institutional Income Strategies Channel.