Fixed-Income ETF Flows Data Reveal Stagflation Fears
Fixed-income investors are buying ETFs for both inflation and recession.
The exchange-traded funds that saw the biggest inflows last week included the iShares 0-3 Month Treasury Bond ETF (SGOV) and the iShares 20+ Year Treasury Bond ETF (TLT), suggesting investors expect either inflation, recession or a combination of both—also known as "stagflation."
If you want to know how investors feel about the markets and economy, look at where they’re putting their money.
For example, the potential for higher inflation arising from a prolonged trade war has fixed-income investors flocking to the low rate-sensitivity and high yields of ultra-short-term Treasury ETFs like SGOV. This trend has been in place for most of 2025.
The massive inflows for rate-sensitive long-term Treasury ETFs like TLT is another recent trend, as inflation tends to push bond prices lower as yields rise. These flows have increased lately as declining consumer confidence has fixed-income investors pricing in a higher probability of recession. This economic outcome would work in favor of funds like TLT, as the Fed has more reason to lower interest rates, pushing prices higher on rate-sensitive ETFs.
What's perplexing in this flows data, which was gathered using etf.com's ETF Pulse tool, is that you don't often see higher flows for both ultra-short and long-term ETFs at the same time. This simultaneous trend suggests investors are pricing in stagflation, an environment of slower or stagnating growth coupled with high or rising inflation.
Fixed-Income ETF Inflows, Week Ending 03/19/2025
Source: ETF flows data from etf.com's ETF Pulse tool.
ETF Pulse is a tracking tool designed to provide investors with insights into the top trending ETFs based on fund flows and performance metrics. ETF Pulse offers a platform to monitor, analyze and capitalize on market trends. Give it a try today.
Diving Deeper: Ultra-Short-Term vs. Long-Term Treasury ETFs
One of the many attractive attributes of ETFs is their flexibility, which enables innovation. In other words, there’s an ETF for almost every market and economic scenario you can imagine.
For example, if an investor expects inflation to linger or worsen, they may consider buying ultra-short-term Treasury ETFs. And if an investor expects recession and falling rates, there are long-term Treasury ETFs.
Ultra-Short-Term Treasury ETFs
Investors buy ultra-short-term Treasury ETFs when they're worried about inflation because these funds offer low interest-rate risk and steady yield. Since ultra-short-term Treasuries mature quickly, they can be reinvested into higher-yielding bonds as interest rates rise, helping investors keep pace with inflation. Additionally, these ETFs provide a safe place to park cash while still earning a return, making them attractive during uncertain economic periods.
Long-Term Treasury ETFs
Investors buy long-term Treasury ETFs when they expect a recession because these bonds tend to rise in price when interest rates fall, which often happens during economic downturns as the Federal Reserve cuts rates to stimulate growth. Additionally, long-term Treasuries provide a safe-haven investment with stable income, as investors seek lower-risk assets when stock markets decline.
Long-term Treasury ETF prices rise more than short-term ETFs in a falling rate environment because they have higher duration, meaning their prices are more sensitive to interest rate changes. When rates decline, the fixed interest payments of long-term bonds become more attractive, increasing their market value significantly more than short-term bonds, which are less affected by rate movements.
