Volatility in the U.K. gilt market is washing up on U.S. shores, harming the values of exchange-traded funds issued by companies including BlackRock Inc.
U.K. currency and Treasury markets were thrown into turmoil after Prime Minster Liz Truss fired Chancellor of the Exchequer Kwasi Kwarteng and reversed a series of unfunded tax cuts and energy-price guarantees. The pound extended losses and yields jumped on British Treasuries, or gilts.
iShares parent BlackRock, the largest issuer of ETFs, reported “muted flows” over the past two weeks for its U.K.-based funds, according to the Financial Times. The iShares £ Index-Linked Gilts UCITS ETF (INXG) took in $23 million and the iShares Core UK Gilts UCITS ETF (IGLT) had net outflows of $35 million, the FT said.
New York-based BlackRock reported earlier this week that iShares helped it boost third quarter earnings that were hit hard by a big drop in assets under management. Fund inflows came to $22 billion, while investment advisory fees for equities from iShares came in at nearly $1.1 billion, beating analyst expectations of $992 million.
The FT also noted Boston-based State Street ’s SPDR Bloomberg 15+ Year Gilt Ucits ETF (GLTL) has been beaten down in the upheaval. U.S. based funds that track British companies have also been pushed lower by uncertainty surrounding the U.K. government’s plans. The iShares MSCI United Kingdom ETF (EWU) lost 9.36% and the Invesco CurrencyShares British Pound Sterling Trust (FXB) fell 1.51% within the last month.
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