Investors are pumping money back into fixed income while stocks trade at inflated prices and short-term Treasury yields are at record highs. For the week ending February 17, all bond funds globally experienced $5.5 billion in inflows, marking the seventh consecutive week of net inflows, according to Bank of America. Of that total, $700 million went to government bond funds, the largest inflow in six weeks.
Meanwhile, equity funds around the globe saw only $300 million in net inflows during the same period, with U.S. stocks experiencing net outflows for a second week in a row.
“The reason for the increased allocation to bonds: They finally offer a reasonable alternative to stocks,” according to Barron’s. “The 10-year Treasury yield is at about 3.9%, from below 0.6% at the low for the pandemic era. High inflation and the consequently higher interest rates, in part from central bank short-term rate increases, have sent bond’s yields up—and their prices down.”
James Ragan, director of wealth management research at investment banking company D.A. Davidson & Co., is quoted in the publication as saying: “A lot of people … are talking about [the fact that] the bond market is much more attractive again,” before adding: “We’re seeing a lot more interest in fixed income in general.”
With short-dated Treasury yields at 5% for the first time in 15 years, investors may want to consider one of the eight duration-specific U.S. Treasury ETFs that BondBloxx Investment Management offers. The funds track a series of indexes developed by Bloomberg Index Services that include duration-constrained subsets of U.S. Treasury bonds with more than $300 billion outstanding. They track indexes that achieve target durations using U.S. Treasury securities, instead of specific maturities or maturity ranges.
Among them are the BondBloxx Bloomberg Six Month Target Duration US Treasury ETF (XHLF), which targets U.S. Treasuries that have an average duration of approximately six months, and the BondBloxx Bloomberg One Year Target Duration US Treasury ETF (XONE), which offers targeted exposure to one-year U.S. Treasuries. Over the past month, XHLF and XONE brought in $41 million and $22 million, respectively, in net inflows.
“In today’s rapidly changing interest rate environment, key priorities for portfolio managers and investors are earning higher yields on strategic cash positions, precisely managing duration risk, and having effective collateral tools,” said BondBloxx client portfolio manager JoAnne Bianco. “BondBloxx Target Duration U.S. Treasury ETFs may help investors in all these areas, with the potential benefits of being lower cost, transparent, liquid and tax efficient.”
BondBloxx was launched in October of 2021 by ETF industry leaders to provide precision ETF exposure for fixed income investors. Since February 2022, the firm has launched 19 fixed income ETFs.
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