Investors Are Cutting Back on Bond ETF Exposure | ETF Trends

Exchange traded fund investors are dumping fixed-income assets, with bond funds suffering their 13th consecutive week of outflows.

Bond funds continued to bleed assets for the 13th straight week ended April 6 as the Federal Reserve positions to drastically reduce its balance sheets and hike interest rates in a bid to curb inflation that has surged to a four-decade high.

According to Refinitiv Lipper data, U.S. investors sold off $2.24 billion in bond funds, compared with net withdrawals of $3.86 billion for the previous week, Reuters reports.

Minutes from the Federal Reserve’s latest meeting revealed this week that officials “generally agreed” in mid-March to reduce up to $95 billion per month from the central bank’s asset holdings as another way to quickly clamp down on surging inflation.

Meanwhile, the benchmark U.S. Treasury 10-year yield hit a three-year high, and the 2 to 10-year spread widened on Thursday. Bond prices and yields have an inverse relationship.

Looking at the various fixed-income categories, municipal bond funds suffered $1.81 billion worth of outflows and taxable funds saw $214 million in redemptions.

U.S. short and intermediate investment-grade funds experienced withdrawals of $1.33 billion in a 13th straight week of outflows.

On the other hand, loan participation funds enjoyed $2.22 billion in net inflows, and high yield funds drew in $1.1 billion for a second straight week of inflows.

For the week ended April 6, among the most hated ETF by asset outflows, the Vanguard Short-Term Bond Index Fund ETF Shares (BSV) saw $684 million in net outflows, the iShares 7-10 Year Treasury Bond ETF (IEF) shrunk by $614 million, the JPMorgan Disciplined High Yield ETF (JPHY) experienced $576 million in outflows and the PIMCO Enhanced Short Maturity ETF (NYSEArca: MINT) lost $462 million.

Meanwhile, investors also trimmed U.S. equity fund exposure for a second straight week to the tune of $931 million, albeit at a 38% lower outflow rate compared to the prior week.

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