European investors remain enticed to invest in Bond ETFs 

Fixed Income ETFs domiciled in Europe remained hot as they experienced net inflows for the fifth consecutive week. They registered USD$534 million[1] in net inflows for the week between August 15th and August 19th. At the helm, was the iShares J.P. Morgan $ EM Bond UCITS ETF (JPEA), which secured the second spot on last week’s flow leaders list, attracting USD$236 million as investors take on more following the lower-than-expected U.S. inflation. In that regard, Morgan Stanley adopted a bullish stance on emerging market debt, in a note, for the first time since 2020. JPEA provides exposure to emerging markets government and quasi-government bonds denominated in United States dollars. Industry pundits, argue that while markets were pulling back, corporate credit and mortgage-backed securities haven’t retreated enough to rival previous declines. Moreover, these types of securities have historically outperformed other market segments following a yield curve inversion and other periods of stress. 

In comparison, the iShares Core € Corp Bond UCITS ETF (IEAC) managed to attract European investors for the third week over uncertainty surrounding recession fears. It secured the second spot on last week’s flow leaders list, having attracted USD$225 million of investor capital compared to the previous week’s USD$105 million. IEAC provides exposure to a globally diversified portfolio of investment-grade corporate debt denominated in EURO. The fund spreads its assets across different sectors such as Banking (29.62%), Consumer Non-Cyclical (14.55%), Consumer Cyclical (8.70%), and many others. 

On the other end of the spectrum, bond ETFs that witnessed the greatest capital exodus were the Lyxor Smart Overnight Return - UCITS ETF (SMART) and the iShares $ Treasury Bond 7-10yr UCITS ETF (IGTM). SMART lost USD$90 million while IGTM shed USD$98 million worth of investments.

In terms of issuer type, corporate debt funds bested their government bond counterparts where the former managed to attract USD$396 million of investor capital. At the same time, the latter took in USD$176 million, according to data gathered by Trackinsight. 

When the fixed income universe is sliced according to credit ratings, the data shows that investment grade ETFs domiciled in Europe took the lion’s share of inflows garnering USD$167 million of inflows. In contrast, their high-yield counterparts registered almost USD$34 million in net outflows over the same period.   

Top 5 Fixed Income ETF flow receivers last week:

• iShares J.P. Morgan $ EM Bond UCITS ETF (JPEA): USD$236 million
• iShares Core € Corp Bond UCITS ETF (IEAC): USD$225 million
• iShares China CNY Bond UCITS ETF (CNYB): USD$197 million
• Xtrackers II Eurozone Government Bond UCITS ETF (XGLE): USD$111 million
• iShares US Aggregate Bond UCITS ETF (IUAA): USD$56 million

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[1] Fund flow Data as of August 19th, 2022.