Big April inflows for funds focused on intermediate Treasurys.
Flows data from May show that investors are taking big bets on intermediate Treasurys: The iShares 7-10 Year Treasury Bond ETF (IEF | A-51) has seen a huge influx of capital so far in May, more than doubling its AUM from $4.5 billion to $9.7 billion in just three weeks.
Similarly, the ProShares Ultra 7-10 Year Treasury ETF (UST), a 2x leveraged take on the same Barclays index, increased its AUM from $29 million to $612 million in that time.
That's a total of $6 billion of inflows into those two ETFs, which is about 17 percent of all the assets invested in ultra-deep U.S. Treasury ETFs. IEF's inflows alone account for more than 65 percent of all bond ETF flows for the month.
Is this a new trend, or the work of one big investor? We can't know for sure, but most of the inflows to IEF happened in two big chunks: about one-third on May 1, and the rest on May 20. Meanwhile, investment-grade corporate bond funds of similar maturity have seen only modest inflows, suggesting the investor(s) are explicitly focused on the exposure this one index delivers—not just any investment-grade debt.
Whoever made this call has been right so far: The 10-year Treasury rate is down from 2.67 to 2.52 percent, while IEF is up 1.5 percent since April. Remember though: The second leg of flows only came on Tuesday. Will there be another rally in intermediate Treasurys?