Retail investors flock to bond ETFs in third quarter as prices slide

Alliancebernstein Holding LP

29/09/2023 16:56

By Bansari Mayur Kamdar
       Sept 29 (Reuters) - Investors continued piling into
exchange-traded funds (ETFs) that track U.S. government debt in
the third quarter, with retail investor flows hitting their
highest level since the pandemic on bets that the Federal
Reserve is done hiking rates.
    Daily retail investor flows into the benchmark iShares 20+
Year Treasury Bond ETF  TLT.O  touched their highest level last
week since March 2020, according to data from Vanda Research.
    The fund saw net retail inflows rise to $1.2 billion so far
this quarter, Vanda's data showed, even as prices slid to their
lowest level since 2010 amid a sharp rise in yields. The ETF saw
retail net inflows of nearly $746 million in the second quarter.
    "With rates getting close to their expected peak, many
investors are starting to take on more duration knowing that
when rates do fall, they will see price appreciation in fixed
income," said Noel Archard, AllianceBernstein's Global Head of
ETFs and Portfolio Solutions.
    Yields on the U.S. benchmark 10-year Treasury note are near
16-year highs on fiscal concerns and renewed hawkishness from
the Federal Reserve. Yields move inversely to prices.
    The iShares 20+ Year Treasury Bond ETF is down 13.3% in the
third quarter and has fallen 10.4% year-to-date.
    Overall, the ETF saw nearly $3.9 billion in net inflows so
far this quarter, according to Lipper data, slowing from nearly
$6 billion last quarter but still on track to post its ninth
straight quarter of inflows.
     
        
  
    A decline in short positioning on the fund could be further
evidence of investors betting that rates are unlikely to go much
higher.
    "Short sellers are looking for the shape of the yield curve
to change in the near term," said Ihor Dusaniwsky, managing
director of predictive analytics at S3 Partners.
    Over the last thirty days, Dusaniwsky said there has been
4.92 million shares of short covering, worth $436 million, a
13.6% drop in total shares shorted.

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Net retail inflows into TLT    https://tmsnrt.rs/48uX069
TLT headed for ninth quarter of inflows    https://tmsnrt.rs/3Zy5plj
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting by Bansari Mayur Kamdar in Bengaluru; Editing by Ira
Iosebashvili)
 ((BansariMayur.Kamdar@thomsonreuters.com;  Follow on X:
@BansariKamdar;))