Investors are reducing their exposure to bond ETFs


EInvestors in funds traded on xchange are shedding fixed income assets, with bond funds suffering their 13th consecutive week of outflows.

Bond funds continued to bleed assets for the 13th straight week ending April 6 as the Federal Reserve positions itself to drastically shrink its balance sheets and raise interest rates in a bid to rein in spiked inflation in four decades.

According to data from Refinitiv Lipper, U.S. investors sold $2.24 billion of bond funds, compared to net withdrawals of $3.86 billion the previous week, Reuters reports.

Minutes from the Federal Reserve’s last meeting this week revealed that officials were “generally in agreement” in mid-March to cut up to $95 billion a month from central bank holdings as a another way to quickly combat soaring inflation.

Meanwhile, the benchmark 10-year US Treasury yield hit a three-year high and the spread between 2 and 10 years widened on Thursday. Bond prices and yields have an inverse relationship.

Looking at the different categories of fixed income securities, municipal bond funds experienced outflows of $1.81 billion and taxable funds experienced redemptions of $214 million.

U.S. investment-grade short-term and mid-term funds saw withdrawals of $1.33 billion in a 13th consecutive week of outflows.

By contrast, loan participation funds enjoyed $2.22 billion in net inflows, and high-yield funds attracted $1.1 billion for a second straight week of inflows.

For the week ended April 6, among the most hated ETFs by asset exits, the Vanguard Short-Term Bond Index Fund ETF Shares (BSV) recorded net outflows of $684 million, iShares 7-10 Year Treasury Bond ETF (IEF) decreased by $614 million, the JPMorgan Disciplined High Yield ETF (JPHY) recorded cash outflows of $576 million and PIMCO Enhanced Short Maturity ETF (NYSEArca: MINT) lost $462 million.

Meanwhile, investors also reduced exposure to US equity funds for a second straight week to the tune of $931 million, albeit at a 38% lower outflow rate from the previous week.

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