October Treat: Junk Bonds & Gold ETFs Pop

Miner ETFs have been the best price performers, while bond ETFs garner the most inflows.

Senior ETF Analyst
Reviewed by: Sumit Roy
Edited by: Sumit Roy

The stock market rebound continued this week as the S&P 500 touched its highest level in nearly two months. The SPDR S&P 500 (SPY | A-99) is now up 5.8 percent in October, a strong performance in a month that has historically been the second-worst of the year (after September).

Gold & Silver Miners Dominate Jump

On Monday, we highlighted the best-performing exchange-traded funds of October. Those funds, comprising mostly copper and energy producers, are still doing well in the month.

However, a new group of ETFs have bullied their way into the top 10: gold and silver miners. In fact, precious-metals-related funds now make up six of the top 10 positions for October, as can be seen from the table below.

Top 10 ETF Of October

TickerFundReturn (%)
SILJPureFunds ISE Junior Silver (Small Cap Miners/Explorers)27.86
COPXGlobal X Copper Miners25.61
PLTMFirst Trust ISE Global Platinum25.30
CUFirst Trust ISE Global Copper25.23
SLVPiShares MSCI Global Silver Miners25.07
SGDMSprott Gold Miners24.04
KWTMarket Vectors Solar Energy23.29
RINGiShares MSCI Global Gold Miners23.28
GDXMarket Vectors Gold Miners22.60
SILGlobal X Silver Miners22.41

Considering the big jump in gold prices this month, the performance of these ETFs hasn't been surprising. The yellow metal hit the highest point since mid-June this week, leading the SPDR Gold Trust (GLD | A-100) to a gain of 5.7 percent in October.

Miners tend to be much more volatile than the underlying metal, which explains their significant outperformance. Yet even as these ETFs rally, investors haven't been too keen on buying into them.

None of the top 10 price performers saw significant inflows, and in fact, investors pulled out $429 million from the Market Vectors Gold Miners ETF (GDX | C-79) during the first half of the month.

Investors Buying Bonds

While ETF investors haven't been too enthusiastic about miners, they did show interest in gold itself. So far this month, GLD has attracted $483 million in inflows, putting it just outside the top 10 inflows list for the month.

One salient theme that has emerged during October is the idea that the Federal Reserve will hold off on hiking interest rates this year due to global slowdown concerns and the recent string of weak U.S. economic data.

That's propelled gold higher, as well as bonds. In fact, bonds are the asset class that's attracted the most capital this month.

As can be seen from the table below, generated using the ETF.com fund flows tool, a number of bond ETFs made the top 10 inflows list:

Source: ETF.com Fund Flows Tool

The iShares 7-10 Year Treasury Bond ETF (IEF | A-51) was a big winner, with nearly $1 billion in inflows. To the extent that the Fed's overnight interest rate stays lower for longer, that puts pressure on the longer end of the yield curve as well (supporting bond prices).

Even more popular than IEF were corporate bond ETFs like the SPDR Barclays High Yield Bond ETF (JNK | B-68) and the iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD | A-77). In addition to support from low interest rates, corporate bonds benefited from speculation that defaults may not be as high as feared.

That's particularly true for the junk bond space, which was hammered in August and September, sending yields to their loftiest level since 2011. Investors may be seeing those yields as attractive now that the stock market has stabilized and the Fed looks to be on hold.

In addition to the bond ETFs, other funds that saw notable inflows were the tech-heavy PowerShares QQQ (QQQ | A-66) and the large-cap iShares Russell 1000 Value (IWD | A-90).

In terms of sectors, investors liked the Industrial Select SPDR (XLI | A-92) and the Consumer Discretionary Select SPDR (XLY | A-91).

Contact Sumit Roy at [email protected].

Sumit Roy is the senior ETF analyst for etf.com, where he has worked for 13 years. He creates a variety of content for the platform, including news articles, analysis pieces, videos and podcasts.

Before joining etf.com, Sumit was the managing editor and commodities analyst for Hard Assets Investor. In those roles, he was responsible for most of the operations of HAI, a website dedicated to education about commodities investing.

Though he still closely follows the commodities beat, Sumit covers a much broader assortment of topics for etf.com, with a particular focus on stock and bond exchange-traded funds.

He is the host of etf.com’s Talk ETFs, a popular video series that features weekly interviews with thought leaders in the ETF industry. Sumit is also co-host of Exchange Traded Fridays, etf.com’s weekly podcast series.

He lives in the San Francisco Bay Area, where he enjoys climbing the city’s steep hills, playing chess and snowboarding in Lake Tahoe.