US ETF Investors ‘Still Hungry’ for Corporate Bonds

US interest rates experienced a volatile first quarter of 2015, which saw the Chicago Board Options Exchange (CBOE) 10-year Treasury note yield trade as low as 1.65% and as high as 2.25%, says Benzinga.

The US financial media outlet attributes much of this bifurcated price action to economists and market watchers’ uncertainty over the timing of a Federal Reserve rate hike. But it notes that this volatility did not stop exchange traded fund (ETF) investors from “pouring into corporate bonds at a breakneck pace” over the past three months.

Benzinga reports that the two largest corporate bond ETFs – the iShares iBoxx $ Investment Grade Corporate Bond ETF and iShares iBoxx $ High Yield Corporate Bond ETF have attracted over US$4.8bn in combined inflows since the start of 2015 and have amassed US$22bn and US$16.7bn respectively in total assets.

“Rather than be concerned about interest rate risk, investors in this [iShares iBoxx $ Investment Grade Corporate Bond] ETF are betting that rates remain stable for an extended period of time alongside corporate credit fundamentals,” it adds.

According to Benzinga, the “concomitant rush to own higher yielding junk bonds associated with high-yield corporate bonds [HYG]” is evidence that the outlook for corporate credit has stabilised after a “brief scare” last December.


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