Demand for bond ETFs appears to be growing.
According to MarketAxess CEO Chris Concannon, there are signs that the Treasury ETF is at the peak of significant inflows.
“We’re about to see what I call [a] bond renaissance,” e-trading platform CEO tells CNBC “next to ETF” this week. “The Fed is still on the move, so I think overall bond yields will remain relatively high and attractive.”
At the end of March, the Federal Reserve raise interest rates by a quarter point — the ninth increase since March 2022. Next Wednesday, Wall Street will receive the minutes of the Fed’s last policy meeting and more clarity on what might happen next.
VettaFi vice president Tom Lydon sees a similar pattern.
“They’re starting to go back not just to Treasuries, but into businesses and high yields with the idea that we can lock in longer maturities and pay out longer for those high interest rates. than that. [and] with the idea that we’re not going to see higher interest rates a year from now,” he said.
VettaFi’s latest data shows that international and US fixed-income exchange-traded funds have received around $45 billion in inflows since the start of the year. Meanwhile, it shows corporate bond ETFs saw $6 billion in outflows in the first quarter.
Lyndon speculates the new interest rates are due to investors losing confidence in traditional 60/40 portfolios.
“We’ve seen a lot of advisors drop a bit, both on the equity side and the fixed income side,” he said. “So safety is key until we start to see confidence that the Fed can really get inflation under control and [there’s] stability in the market”.
