Long-Duration Government Bond ETFs See Positive Flows Amid Rising Yields

US investors flocked to government bond ETFs over the course of the 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 10 basis points to 3.48% while the yield on the 2-year T-note gained almost 30 basis points to reach 4.06%.

Higher rates attracted almost $3.8 billion in net inflows to US government bond ETFs last week. The iShares 20+ Year Treasury Bond ETF, which manages $34 billion in assets, recorded $969 million in fresh inflows even though the ETF lost 0.43% over the week (although it was up 7.45% year-to-date as of March 31st). This further implies an unwavering focus from investors on safety and security, given the ongoing concerns surrounding the global economic outlook and Fed’s monetary policy.

US high-yield corporate bond ETFs, on the other hand, saw outflows of $1.4 billion in just 5 days, leading to $9.5 billion of outflows in Q1 2023 even though the asset class was up 1.68% for the week. 

In Europe, the yield on the 10-year German Bund rose 18 basis points from 2.12% to 2.30%, while yield on the 2-year German Bund rose from 2.38% to 2.70%. These higher yields led to net inflows of almost $1.3 billion to government bond ETFs over the week.