European investors flock to Corporate Debt ETFs

Corporate Debt ETF flows increase over decreasing recession fears 

Fixed income ETFs domiciled in Europe recorded USD$1.8 billion[1] in net inflows for the week between August 01stand August 05th. European investors swarmed corporate debt ETFs in a sign of improving sentiment after unemployment in the United States dipped to its lowest level in 50 years. Meanwhile, JP Morgan released a report claiming that the probability of the U.S. economy receding has dropped from 50% to 40%.  

Flows into corporate debt are concurrent with falling yields as fears of a recession diminish, and corporations look once again into issuing bonds. This is particularly evident for investment-grade corporate debt vehicles, which pulled in USD$1.55 billion of investor money during the first week of August. In contrast, their high yield counterparts registered almost USD$30 million in net outflows over the same period. While assets flowed in and out of the full range of fixed income securities, corporate bond ETFs took the lion’s share, totaling USD$1.53 billion across all issuer types. Government bond ETFs meanwhile, managed to bring in USD$414 million compared to the previous week’s inflows of USD$276 million.

The iShares $ Corp Bond UCITS ETF (LQDE) led the flow receivers to have attracted USD$604 million over the week. This long-duration ETF provides diversified exposure to investment-grade corporate bonds issued in USD and spread across different sectors, namely industrials, utilities, and financials. The government bond ETF, iShares $ Treasury Bond 20+yr UCITS ETF (IDTG), came in second, having netted USD$397 million in inflows.  

Against this backdrop, investment grade bond ETFs – across all issuer types – saw the highest weekly inflows with USD$1.90 billion, whereas high yield bond ETFs shed USD$30 million of assets over the course of the week.  

Top 5 flow receivers last week:

•  iShares $ Corp Bond UCITS ETF (LQDE): USD$604 million
• iShares $ Treasury Bond 20+yr UCITS ETF (IDTG): USD$397 million
• iShares J.P. Morgan $ EM Bond UCITS ETF (SEMB): USD$342 million
• iShares Core € Corp Bond UCITS ETF (IEAC): USD$190 million
• iShares Pfandbriefe UCITS ETF (EXHE): USD$177 million

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[1] Fund flow data as of August 05th, 2022.