From a shock vote to inflationary fears, investors use bond ETFs to access markets on demand in the face of uncertainty…
Stephen Cohen, Head of Fixed Income Beta at BlackRock
— The strongest theme driving global demand for bond ETFs remains the search for yield
– Investors poured funds into emerging markets exposures as markets recovered from the Brexit vote, helped by more hopes of central bank easing. $276m into the EMEA-domiciled IEMB in June alone.
– The surge in demand for European corporate bond ETFs continued into the second quarter, following the ECB’s March announcement of the corporate bond purchase program. We saw $2.3bn inflows into the largest five iShares Euro corporate bond products (IEAC, IBCX, IHYG, IE15 and IEXF) during the quarter, and $4.4bn year to date.
– European government bond yields moving further into negative territory after the Brexit vote also drove greater demand for US investment grade and Euro corporate ETFs.
– Investors appear to position themselves for a rise in US inflation on the back of consistent US growth and continued easy monetary policy by increasing exposures to Treasuries.