Demand for bond ETFs appears to be on the rise.
According to Chris Concannon, CEO of MarketAxess, there are signs that Treasury ETFs are on the cusp of significant inflows.
“We are about to see what I would call (a) bond renaissance,” the CEO of the electronic trading platform told CNBC’s “ETF Edge” this week. “The Fed is still taking action, so I expect bond yields to remain relatively high and attractive overall.”
At the end of March, the Federal Reserve raised interest rates by a quarter point – the ninth rate hike since March 2022. Next Wednesday, Wall Street will receive the Fed minutes of the last policy meeting and more clarity about what may come next.
VettaFi Vice Chairman Tom Lydon sees a similar pattern.
“They’re starting to get back not only to Treasuries, but to corporates and high yield with the idea that maybe we can lock in a longer duration and longer payment for those higher rates, (and) with the idea that we will in a year no more seeing higher rates,” he said.
The most recent data from VettaFi shows that international and U.S. exchange-traded fixed income funds saw about $45 billion in inflows since the start of the year. Meanwhile, it found that corporate bond ETFs saw $6 billion outflows in the first quarter
Lydon speculates that the renewed interest is caused by investors losing faith in traditional 60/40 investment portfolios.
“We’ve seen a lot of advisors take a little bit off the table, both on equities and on fixed income,” he said. “So safety is key until we start to see confidence that the Fed really has some control over inflation and[there is]stability in the market.”
