Tuesday, 06 February 2024 05:45

Fixed Income ETF Flows Favoring Longer Duration

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The era of high yields has led to a significant boost of inflows into fixed income ETFs. Last year, short duration bond ETFs were the biggest recipient of inflows, but this started to change at the end of last year. Inflation started to move closer to the Fed’s 2% target, and the market began to price in rate cuts in 2024.

So, investors have been moving further out in the curve into intermediate and longer-duration fixed income ETFs to lock in yields for a longer period of time. One example of this can be seen in BondBloxx ETFs.

For instance, the BondBloxx Bloomberg Ten Year Target Duration US Treasury ETF has seen $49 million of inflows YTD. This is more than 50% of net inflows over all of last year. In contrast, the BondBloxx Bloomberg Six Month Target Duration US Treasury ETF only has $17 million of net inflows YTD, while it had $904 million of inflows last year. 

BondBloxx has also seen similar flows from its 1 Year and 2 Year duration-focused Treasury ETFs. To appeal to fixed income investors seeking longer duration exposure, the firm recently launched 3 high-yield corporate bond ETFs with time frames of 1-5 years, 5-10 years, and more than 10 years. 

Finsum: Flows into fixed income ETFs remain strong in 2024, but one definite change is that investors are favoring intermediate and longer-duration ETFs in anticipation of the Fed cutting rates.    


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