European investors flood Bond ETFs

European investors pour capital into all issuer types

Fixed income ETFs domiciled in Europe recorded USD$1.6 billion[i] in net inflows for the week between July 18th and July 22nd. While assets flowed into the full range of fixed income securities Corporate bond ETFs took the lion’s share with USD$810 million in inflows, closely followed by  Government bond ETFs which pulled in USD$746 million of investor money.

A possible explanation for this trend is the structure of the ETF itself, which can serve as an efficient price-discovery vehicle for the true fair value of the underlying basket of bonds it holds.  In addition, June’s Consumer Price Index (CPI) in the United States settled high at 9.1%, leading to the expectation that the Fed will likely raise benchmark rates an additional three-quarters or even one basis point in its next meeting on Wednesday. Meanwhile, in Europe, the European Central Bank (ECB) raised interest rates by half a percentage point for 19 eurozone countries in an effort to curb inflation. This will potentially drive bond yields even higher making fixed-income securities, and corresponding ETFs, more attractive to investors resulting in even more assets into fixed-income ETF markets.

Against this backdrop, Goldman Sachs Access China Government Bond UCITS ETF (CBND) saw the highest weekly inflows with USD$452 billion, followed by Xtrackers II Eurozone Government Bond 5-7 UCITS ETF (X57E) which netted USD$433 million in inflows.  

Top 5 Flow Receivers Last Week

• Goldman Sachs Access China Government Bond UCITS ETF (CBND): USD$452 million
• Xtrackers II Eurozone Government Bond 5-7 UCITS ETF (X57E): USD$433 million
• Xtrackers II ESG EUR Corporate Bond UCITS ETF (XB4F): USD$193 million
• AMUNDI INDEX EURO AGG SRI - UCITS ETF DR (EGRI): USD$187 million
• Invesco US Treasury Bond 7-10 Year UCITS ETF (TRDE): USD$120 million

[i] Fund flow Data as of July 22nd.