Record Demand For Fixed Income ETFs

Year-to-date inflows for fixed income ETFs are a whopping $129.2 billion.

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

U.S. fixed income ETFs may have registered outflows last week, but they are still on track for a record year.

Net inflows for the segment totaled $129.2 billion as of Thursday, Nov. 14, according to the latest data from FactSet ($112.1 billion for U.S. fixed income ETFs and $17.1 billion for international fixed income ETFs).

If the year ended there, that would be the largest annual haul ever for fixed income ETFs. For comparison, net inflows for the group totaled $98.7 billion, $125.8 billion and $92.7 billion in 2018, 2017 and 2016, respectively.

Making the amount of 2019’s fixed income inflows even more impressive is the fact that the segment leads all others, even stock ETFs, which have been roaring to record highs. As of last week, equity ETFs had only taken in $109.6 billion in new money, less than fixed income ETFs—a rare situation.

Of course, fixed income securities set some record highs of their own earlier this year. The 30-year Treasury bond yield dipped to an all-time low of 1.9% in August as multiple Fed rate cuts were deployed to offset nagging trade war and economic concerns. In turn, fixed income ETFs surged (bond yields and prices move inversely so prices have risen).

The iShares 20+ Year Treasury Bond ETF (TLT), which follows the long bond, had a year-to-date gain of more than 23% in August, and even with the recent pullback, is up a solid 15.7%.

Perfect Environment

Combine the demand for safety with those outsized returns, and you have the perfect environment for fixed income ETFs. It’s no wonder inflows are at record levels.

Fixed Income ETFs With The Largest Inflows

 

TickerFund NameYTD Inflows ($M)
BNDXVanguard Total International Bond ETF$9,983
BNDVanguard Total Bond Market ETF$7,842
GOVTiShares U.S. Treasury Bond ETF$7,614
IEFiShares 7-10 Year Treasury Bond ETF$7,579
TLTiShares 20+ Year Treasury Bond ETF$7,140
MBBiShares MBS ETF$6,894
AGGiShares Core U.S. Aggregate Bond ETF$5,510
JPSTJPMorgan Ultra-Short Income ETF$4,701
VCITVanguard Intermediate-Term Corporate Bond ETF$4,573
HYGiShares iBoxx USD High Yield Corporate Bond ETF$4,540
VCSHVanguard Short-Term Corporate Bond ETF$4,357
IGIBiShares Intermediate-Term Corporate Bond ETF$3,407
JNKSPDR Bloomberg Barclays High Yield Bond ETF$2,934
VMBSVanguard Mortgage-Backed Securities ETF$2,905
SCHPSchwab U.S. TIPS ETF$2,390
IGSBiShares Short-Term Corporate Bond ETF$2,363
USHYiShares Broad USD High Yield Corporate Bond ETF$2,278
MUBiShares National Muni Bond ETF$2,200
PFFiShares Preferred and Income Securities ETF$2,154
VTEBVanguard Tax-Exempt Bond ETF$2,094

 

That’s not the whole story, though. Interest in fixed income ETFs has been picking up steam for years as investors embraced the much more efficient exchange-traded fund wrapper at the expense of fixed income mutual funds.

While inflows this year are the strongest ever, they were also robust in each of the last few years.

It doesn’t hurt, however, that investors have an ever-increasing number of options in the space—there are 421 U.S.-listed fixed income ETFs on the market right now—something for everyone.

Tried & True

That said, as is typically the case, investors are putting the bulk of their money into the tried and true, low cost, index-tracking funds.

The aforementioned TLT, for example, is No. 5 on the fixed income inflows list for the year, with $7.1 billion.

Its sister fund, the iShares 7-10 Year Treasury Bond ETF (IEF), holds the No. 4 position, with inflows of just under $7.6 billion, while the broader iShares U.S. Treasury Bond ETF (GOVT), takes No. 3, with just over $7.6 billion. 

At No. 2 is a fund that’s broader still, the Vanguard Total Bond Market ETF (BND), which holds nearly the whole universe of U.S. dollar-denominated, investment-grade, taxable fixed income securities.

Int’l Standout

Interestingly, though most of this year’s fixed income inflows went into U.S. bond funds, the most popular fixed income fund of all is an international one. The Vanguard Total International Bond ETF (BNDX) gathered a whopping $10 billion so far this year.

BNDX track the universe of nondollar-denominated, investment-grade bonds, hedged against currency fluctuations. BNDX is heavily weighted toward European and Asian bond issues.

Other than BNDX, there’s not a single international fixed income ETF with more than $1 billion of inflows for 2019. The rest of the field consists of various U.S.-focused funds—the iShares MBS ETF (MBB), the iShares Core U.S. Aggregate Bond ETF (AGG), the JPMorgan Ultra-Short Income ETF (JPST) and many more.

In fact, there are close to three dozen fixed income ETFs that have year-to-date inflows of $1 billion or more this year, another remarkable achievement for a group that has surpassed nearly everyone’s expectations. 

Email Sumit Roy at [email protected] or follow him on Twitter sumitroy2

 

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.