In an article for CNBC, Sean Conlon discussed some factors behind the rise in demand for fixed income ETFs. Despite some softening in the economy and in terms of inflationary pressures, the Fed seems intent on hiking by another quarter point at its next meeting. 

This is leading to juicy opportunities in the fixed income space which may not last if inflation does continue to trend lower or a recession materializes in the second half of the year. Additionally, current futures markets are forecasting that the Fed will be cutting rates by the end of the year. As noted by Vettafi, this dynamic is leading to inflows into Treasuries, corporate bonds, and high-yield bonds as investors look to lock in duration and yields.

Since the start of the year, there was about $45 billion in inflows into fixed income ETFs. Another factor behind this demand is the underperformance of traditional asset allocation models like 60/40. This is leading many investors to get more conservative and examine the fixed income space for opportunities.Until market stresses ease, demand for fixed income ETFs should remain elevated. 

Finsum: Fixed income ETF demand rose sharply in Q1. Given the Fed’s hawkish bent and current market conditions, this should persist.