In recent weeks, several bond exchange-traded funds (ETFs) have experienced a significant surge in inflows, indicating a heightened interest among investors.
This shift coincided with a market that significantly upped bets on Federal Reserve rate cuts for 2024, backed by a robust and ongoing disinflationary trend in the U.S. economy.
Speculators have gone as far as factoring in an initial rate cut as early as March 2024, with whispers of a total of five rate cuts by December 2024.
But which bond ETFs are currently piquing investors’ interest?
From ‘Cash-Like’ to ‘Equity-Like’
While the third quarter in 2023 witnessed a notable uptick in inflows into cash-linked bond ETFs, primarily those investing in short-dated Treasury bonds and bills, the latest trends are veering towards more aggressive fixed-income strategies.
Investors are strategically positioning themselves in anticipation of an imminent U-turn in Fed’s monetary policy stance, eyeing a select group of bond ETFs that have weathered the storm during the recent spate of interest rate hikes.
Their bullish stance on riskier bond ETFs underscores a burgeoning belief that the bond market landscape could undergo a substantial recalibration in the coming months, as they brace for a more accommodating monetary policy environment.
These ETFs encompass a diverse range, including long-term Treasury bonds, emerging-market bonds, and high-yield corporate bonds.
Top 10 Bond ETFs by Fund Inflows in the Past Month
| Name | Fund Flows (1-month) |
|---|---|
| iShares Trust – iShares iBoxx $ High Yield Corporate Bond ETF HYG | $3.69 bn |
| iShares Trust – iShares Core U.S. Aggregate Bond ETF AGG | $2.62 bn |
| SPDR Series Trust – SPDR Bloomberg High Yield Bond ETF JNK | $1.99 bn |
| iShares Trust – iShares J.P. Morgan USD Emerging Markets Bond ETF EMB | $1.89 bn |
| iShares Trust – iShares 20+ Year Treasury Bond ETF TLT | $1.62 bn |
| Vanguard Bond Index Funds – Vanguard Total Bond Market ETF BND | $1.56 bn |
| iShares Trust – iShares Broad USD High Yield Corporate Bond ETF USHY | $1.31 bn |
| Vanguard Scottsdale Funds – Vanguard Long-Term Treasury ETF VGLT | $665.99 bn |
| Vanguard Charlotte Funds – Vanguard Total International Bond ETF BNDX | $641.06 bn |
| iShares Trust – iShares 5-10 Year Investment Grade Corporate Bond ETF IGIB | $216.67 bn |
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