Government bonds ETFs see positive flows amid rising yields

Investors have been flocking to US government bond ETFs this week as Treasury yields rebounded in the wake of a deal for deposits and assets of Silicon Valley Bank. The benchmark 10-year US Treasury note yield increased by 17 basis points to 3.55%, while the yield on the 2-year T-note gained almost 33 basis points to 4.10%. These higher rates have attracted almost $4.1 billion in new capital flows to US government bond ETFs over the last four days.

The iShares 20+ Year Treasury Bond ETF, which manages $33 billion in assets, booked $400 million in fresh inflows even though it was down 1.83% over the week, but up 5.93% year-to-date as of 30 March. This demonstrates that investors have an unwavering focus on safety and security, given the ongoing concerns surrounding the global economic outlook and Fed’s monetary policy.

Meanwhile, US high-yield corporate bond ETFs saw outflows of $1.7 billion in just four days, compared with outflows of $9.8 billion in Q1 2023.  Yet the asset class was up 0.87% for the week. That’s one-third of its YTD performance (+2.47%). This highlights the importance of diversification in investment portfolios, as different asset classes can perform differently under various market scenarios.