As credit concerns grow, short-term bond ETFs see huge inflows

At the same time, investors are pulling funds from high-yield bond funds

Nov 20, 2018 @ 9:20 am

By Bloomberg News

As the corporate credit market flashes caution signs, exchange-traded fund investors are seeking shelter in short-term bond funds.

The JPMorgan Ultra-Short Income ETF (JPST) saw its third-largest inflow for the past year on Friday, with more than $233 million coming in. And the SPDR Bloomberg Barclays 1-3 Month T-Bill ETF (BIL), which tracks short-term U.S. government debt, saw its second-largest cash infusion in at least the last five years. Investors poured around $581 million into BIL Friday, just shy of its record, which it reached at the end of last month.

That's not all. The iShares Short Treasury Bond ETF (SHV) attracted more than $673 million on Friday, also its second-largest inflow this year. And the $5.5 billion iShares Short Maturity Bond ETF, or NEAR, saw inflows of around $190 million, the most since July. Together, the four funds took in around $1.5 billion on Friday alone.

"It's the same trend we have seen for most of the year. Investors are getting out of high-yield and investment-grade corporate debt and into shorter duration Treasuries as the yield curve remains flat," said Mohit Bajaj, director of exchange-traded funds at WallachBeth Capital. "They are reallocating into less risky instruments with further concern in the market."

Dumping Junk

At the same time, investors pulled more than $992 million from the $7.6 billion SPDR Bloomberg Barclays High Yield Bond ETF (JNK) for the week ended Friday. That was the largest weekly outflow for the fund since February. And the $13.6 billion iShares iBoxx High Yield Corporate Bond ETF (HYG) saw $1.15 billion drain away last week, the most since April.

Christian Fromhertz, CEO at Tribeca Trade Group, echoed that sentiment that investors are seeking less risky funds, saying that "credit spreads are widening" and "people are starting to get concerned about credit risk."

More investors are growing cautious about the corporate debt market, with heavily debt-laden companies like General Electric, Ford and Campbell Soup Co. flashing warning signs as global growth slows and interest rates rise.

Some investors fear that the assumptions built into companies' profit forecasts could prove wrong, prompting downgrades.

"As single stocks remain under pressure and credit spreads widen, corporate debt ETFs will also sell off with the downward move in equities," Mr. Bajaj said.

(More: JPMorgan says bond ETFs may help neutralize a 'credit bomb')

0
Comments

What do you think?

View comments

Most watched

INTV

Young professionals see lots of opportunity to reinvent the advice experience

Members of the 2019 InvestmentNews class of 40 Under 40 have strategies to overcome the challenges of being young in a mature industry.

INTV

Young advisers envision a radically different business in five years

Fintech and sustainable investing are two factors being watched closely by some of the 2019 class of InvestmentNews' 40 Under 40.

Latest news & opinion

New Jersey fiduciary rule: Pressure leads to public hearing, comment deadline extension

Industry push results in chance to air grievances on July 17 and another month to present objections.

InvestmentNews' 2019 class of 40 Under 40

Our 40 Under 40 project, now in its sixth year, highlights young talent in the financial advice industry. These individuals illustrate the tremendous potential of those coming up in the profession. These stories will surprise, entertain, educate and inspire.

Galvin to propose fiduciary rule for Massachusetts brokers

The secretary of the commonwealth is proposing a fiduciary standard in response to an SEC investment-advice rule he views as too weak.

Summer reading recommendations from financial advisers

Here are some books that will keep you informed and entertained during summer's downtime

4 strategies for Roth conversions

There's never been a better time to do a Roth conversion, and here are several ways to go about it.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print