US Fixed Income ETFs Experience $58B Net Inflows

By Todd Rosenbluth, CFRA

With $58 billion of net inflows in the first nine months, demand for US fixed income ETFs has remained strong in 2018 even as the Federal Reserve further raised interest rates. Yet, such demand has led to persistent concerns that investors can be harmed.

Heather Brownlie, US Head of BlackRock’s Fixed Income iShares, explained exclusively to CFRA in a video that the bond ETF market is a tiny (less than 1.5%) fraction of the total U.S. debt market and she consistently sees investors looking to the ETF for price discovery and to access liquidity.

Responding to a common concern that index-based ETFs are loaded up on the most indebted companies, Brownlie explained to us that investors need to be careful to understand that more debt does not mean higher risk. For example, the largest debt issuers in iShares iBoxx Investment Grade Corporate Bond ETF (LQD) also have the strongest balance sheets with the most asset behind them. According to CFRA, AT&T, Goldman Sachs and JPMorgan are some of the larger issuers in LQD. To watch the CFRA video on understanding the potential risks with bond ETFs, click here.