ETF Investors Start Year Piling Into Bonds

Investor wariness pulls ETF flows into the safety of fixed income.

Reviewed by: Cinthia Murphy
Edited by: Cinthia Murphy

In the first week of 2015, ETF investors trimmed their exposure to U.S. equities, taking out more than $9.6 billion from the asset class, and piled almost $1.7 billion into broad-based bond funds looking for the safety of fixed income in a world that's struggling to forge growth.


The U.S. economy is expanding, but elsewhere, the eurozone is facing its first year-on-year negative inflation reading, putting it in deflationary territory. As the European Central Bank prepares to embark on a bond-buying stint in an effort to spur the region's economic growth, Greece might again be in line to exit the eurozone if an anti-austerity government comes to power there.


Net outflows were more than $9 billion in the week ended Thursday, Jan. 8, pulling total U.S.-listed ETF assets to just below $2 trillion, according to data compiled by The weekly outflows followed a record-shattering 2014, when total inflows in the entire year were a bit shy of $250 billion.


On another front, depressed oil prices have started to show their negative impact on producers and have been weighing on energy stocks, even if lower gasoline prices bode well for consumer spending. In the past six months, energy stocks in the S&P 500 have declined more than 22 percent as WTI crude oil slipped to 5 ½-year lows, below $50 a barrel.


In a way, the demand for U.S. bonds, specifically, has been evident this year, with yields on 10-year Treasurys plunging below 1.95 percent earlier in the week. Funds like the iShares 20+ Year Treasury Bond ETF (TLT | A-83) and the PIMCO 25+ Year Zero Coupon U.S. Treasury ETF (ZROZ | C-57) have rallied sharply in recent days as investors bet on the perceived safety of long-dated U.S. debt amid growing concerns about the global economy.


The appeal of U.S. fixed income goes beyond safety. From an income perspective, U.S. sovereign bonds are still shelling out attractive yields—even at current levels—relative to foreign debt such as German bonds, which are at record-low yields, and Japanese debt.


From a flows perspective, investors poured $386 million into the iShares Core U.S. Aggregate Bond ETF (AGG | A-98) in the week ended Thursday, Jan. 8. About 37 percent of the fund is tied to U.S. Treasurys. The Vanguard Total Bond Market ETF (BND | A-94), which allocates about 40 percent to U.S. Treasurys, raked in $373 million in the same period.


These are the biggest and broadest fixed-income ETFs out there, and in 2014, they were among the most popular, each raking in more than $7 billion in fresh net assets in 12 months.


What has not been very popular so far this new year is U.S. equities. The SPDR S&P 500 ETF (SPY | A-99) bled $9.19 billion in assets in the past five days, while the PowerShares QQQ (QQQ | A-48) and the iShares Russell 2000 ETF (IWM | A-86) saw $2.0 billion and $1.2 billion in asset outflows in the period, respectively. 


Top 10 Creations (All ETFs)

TickeryNameNet Flows ($,mm)AUM ($,mm)AUM % Change
AGGiShares Core U.S. Aggregate Bond386.7923,818.341.65%
IXUSiShares Core MSCI Total International Stock386.401,262.6044.10%
BNDVanguard Total Bond Market373.8126,605.601.43%
VTIVanguard Total Stock Market367.7551,310.670.72%
USOUnited States Oil327.831,495.2628.08%
XLEEnergy Select SPDR319.2211,902.682.76%
RSPGuggenheim S&P 500 Equal Weight292.0610,415.762.88%
VNQVanguard REIT289.5528,763.871.02%
VOOVanguard S&P 500272.3627,859.150.99%
HEDJWisdomTree Europe Hedged Equity200.995,830.963.57%


Top Redemptions Table

TickeryNameNet Flows ($,mm)AUM ($,mm)AUM % Change
SPYSPDR S&P 500-9,194.41207,017.31-4.25%
QQQPowerShares QQQ-2,066.2838,395.16-5.11%
IWMiShares Russell 2000-1,282.3228,547.50-4.30%
IVViShares Core S&P 500-945.1169,987.38-1.33%
VWOVanguard FTSE Emerging Markets-327.7445,993.92-0.71%
EWJiShares MSCI Japan-312.4113,936.14-2.19%
XLFFinancial Select SPDR-295.0920,729.85-1.40%
XLIIndustrial Select SPDR-271.198,912.04-2.95%
JNKSPDR Barclays High Yield Bond-220.499,433.71-2.28%
EMBiShares J.P. Morgan USD Emerging Markets Bond-196.024,196.65-4.46%


Asset Classes 

 Net Flows ($, mm)AUM ($,mm)% of AUM
U.S. Equity-9,649.341,161,532.01-0.82%
International Equity-656.93419,837.22-0.16%
U.S. Fixed Income1,167.41286,496.860.41%
International Fixed Income-5.7523,802.82-0.02%
Asset Allocation-7.445,356.44-0.14%


Cinthia Murphy is head of digital experience, advocating for the user in all that does. She previously served as managing editor and writer for, specializing in ETF content and multimedia. Cinthia’s experience includes time at Dow Jones and former BridgeNews, covering commodity futures markets in Chicago and Brazil equities in Sao Paulo. She has a bachelor’s degree in journalism from the University of Missouri-Columbia.