Bond ETFs have gained record inflows over the month of April despite rising yields, due to volatility in equities and a search for safer havens.
As uncertainty looms following several equity sell-offs in 2018, global investors have ploughed $14.7 billion into US-listed debt ETFs last month, the most since October 2014, as reported by several outlets. In comparison, equity ETFs in the US garnered $8.6 billion over the same period.
Bond ETFs see record streak versus equities
April is the third consecutive month that fixed income ETFs have gained more net inflows than their stock counterparts, the longest such pattern in almost seven years.
One fund to see major benefits was the iShares Short Treasury Bond ETF (SHV) which invests in bonds with between one month and one year to maturity. SHV saw an injection of more than $2 billion as investors favoured short-term duration funds due to worries about future monetary policy and tightening of interest rates.
Yields stabilise in 2% range then investors swoop in
Massive bond inflows come despite rising yields, which act inversely to bond prices. The yield on the 10-year US Treasury, for example, hit a four-ear high above 3% late last month before slipping again.
Industry experts say investors placed their cash in the asset class once rates appeared to stabilise in the high 2% range.
Fixed income ETFs track the performance of bond prices rather than yields, therefore, certain bond ETFs have fallen during the past month, like the broad market iShares Core US Aggregate Bond ETF (AGG) fell over 1% in April.
Despite a bond ETF bonanza, the asset class still has a tiny proportion of overall ETF assets. According to FactSet, bond ETFs have just $602 billion compared to $2.8 trillion in equity ETFs. Around the world, bond ETFs now account for more than $800 billion, as shown by BlackRock.