Bond ETF demand seems to be increasing.
There are indications that big inflows are about to occur for Treasury ETFs, according to MarketAxess CEO Chris Concannon.
The CEO of an electronic trading platform stated this week on CNBC’s “ETF Edge” that “we’re about to see what I’d call [a] bond renaissance.” Since the Fed is still acting, I would anticipate that overall bond yields will continue attractively high.
The Federal Reserve increased interest rates by a quarter percent in late March, making it the ninth increase since March 2022. The Fed’s minutes from the most recent policy meeting will be released to Wall Street on Wednesday, along with further information about possible future developments.
Tom Lydon, vice chairman of VettaFi, observes a like pattern.
With the belief that we might be able to lock in a longer duration and longer payment for those higher rates, [and] with the belief that we’re not going to see higher rates a year from now, he added, “they’re starting to move back not just into Treasurys, but into corporates and high yields.”
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According to VettaFi’s most recent data, exchange-traded funds that invest in foreign and domestic fixed income have received nearly $45 billion since the year’s start. In addition, it was discovered that corporate bond ETFs lost $6 billion in the first quarter.
Lydon hypothesizes that investors’ waning confidence in conventional 60/40 investing portfolios is what is causing the rising interest.
Both on the equities and fixed income sides, “we’ve seen a lot of advisors take a little bit off the table,” he added. Therefore, until we gain trust that the Fed actually has some control over inflation and that the market is stable, safety is paramount.