Short-Term Treasury ETFs Gain At Corporate Bonds' Expense

Data suggest fixed income investors are ditching corporate bond exchange traded funds, including the iShares iBoxx $ Investment Grade Corporate Bond ETF (NYSEArca: LQD), in favor short-dated Treasury ETFs.

Flows data also indicate investors are departing the iShares iBoxx $ High Yield Corporate Bond ETF (NYSEArca: HYG), the largest high-yield corporate bond ETF.

“Almost $1.4 billion has fled three popular debt ETFs over the past two days, according to Bloomberg data. Among them is the largest ETF tracking high-yield bonds, the iShares iBoxx $ High Yield Corporate Bond ETF (HYG), which recorded outflows of $715 million, the most since a three-week selloff over a month ago,” reports Bloomberg.

Previously, investors widely embraced corporate bond funds in the search for added income and yield. Fueling the increased demand for debt assets, tumbling yields on safer government and corporate debt pushed investors towar riskier and higher yielding debt, like junk bonds. Furthermore, U.S. corporate bonds are enjoying a stronger tailwind in an environment of strong economic growth, healthy earnings and dropping default rates.