European investors pour money into corporate debt 

European fixed income ETFs attracted net inflows of USD$1.167 billion[i] for the last week (from April 25th to April 29th) compared to USD$577 million a week earlier. They gathered USD$12.2 billion of net inflows on a year-to-date basis. Investment grade fixed income ETFs were the primary beneficiaries. They received USD$2.8 billion in net inflows last week and USD$14.4 billion in the previous four months. Conversely, high yield ETFs recorded outflows of USD$249 million, bringing year-to-date net outflows to USD$2.2 billion. Flight-to-safety seems to be the primary driver of share redemptions.

Issuer data shows that European investors favored Corporate Debt ETFs over Treasury ETFs and Agency bond ETFs. Their net inflows reached USD$1 billion last week. Meanwhile, Treasury and Agency ETFs, tracking government and government agencies' debt, faced a wave of selling with outflows totalling USD$167 million.

Corporate Bond ETFs net inflow winners

The iShares $ Short Duration Corp Bond UCITS ETF (SDIA) was last week's winner with net inflows of USD$358 million. SDIA passively managed fixed income fund was launched on April 13th, 2017. SDIA, the largest recipient of flows in the corporate debt category, seeks to track the performance of the Markit iBoxx USD Liquid Investment Grade 0-5 Total Return Index. The fund allows investors to diversify their portfolios through 0-5yr corporate bonds denominated in USD. As its name suggests, SDIA invests only in investment grade fixed income securities. The fund's portfolio holds 2,146 underlying securities with a weighted average coupon of 2.93%[ii] and a weighted average maturity of 2.6 years. SDIA is diversified in credit quality with a 46.40% allocation to A-rated bonds and a 44.38% exposure to BBB-rated bonds. Almost one-third of the portfolio is composed of bonds issued by banks in terms of sectors. The remainder of the portfolio is spread across industrials, utilities, and other financials. Its TER is 0.20%, and it trades on the London Stock Exchange and SIX Swiss Exchange.

Government Bond ETFs saw major outflows

The iShares China CNY Bond UCITS ETF (CNYB) saw the most significant weekly outflows among all the fixed income ETFs domiciled in Europe. The fund seeks to replicate the performance of the Bloomberg China Treasury + Policy Bank Index. It provides exposure to the Chinese bond market by investing in CNY(RMB-)denominated bonds issued by the People's Republic of China Finance Ministry. It holds 85 underlying securities with an effective duration of 5.85 years. CNYB charges 0.35% a year and trades on the following five exchanges: London Stock Exchange, Euronext Amsterdam, Borsa Italiana, SIX Swiss Exchange, and Deutsche Börse Xetra.

ETFs in play:

• Government Bond ETFs
• Corporate Bond ETFs

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[i] Fund flows data as of April 29th, 2022.

[ii] Fund characteristics data as of April 29th, 2022.