Investors move into ultra-short-term bonds amid concerns over U.S. interest rates
As uncertainty grows over the possibility of U.S. interest rate hikes and conflict in the Middle East, funds are concentrating in ultra-short-term bond funds with maturities of less than 1 years. BlackRock’s 20 or longer Treasury ETF saw 32 billion dollars flow out, while its 0–3-month ETF attracted 222 billion dollars.
As market uncertainty rose again over the possibility of U.S. interest rate hikes and conflict in the Middle East, investors are shifting funds into ultra-short-term bonds. Bond exchange-traded funds (ETFs) investing in bonds with maturities of less than 1 years—the “ultra-short-term bond funds”—have attracted the most money among bond ETFs so far this year. The same trend was confirmed in figures compiled on 28 (local time).
Last 3, ultra-short-term bond funds recorded their largest-ever monthly inflow. These funds currently offer returns of around 4% while maintaining relatively low price volatility. They are similar to money market funds (MMFs), but invest in a wider range of bonds, giving them higher returns and somewhat lower stability.
Since the Federal Reserve (Fed) began raising interest rates in 2022, this combination has gained popularity among investors. It has repeatedly been pointed out that risk and return profiles differ depending on the range of bonds managed and their maturities. Some investors are avoiding volatile products and moving into products with shorter maturities.
Long-term bonds, by contrast, have performed poorly so far this year. The longer a bond’s maturity, the more sensitive it is to changes in interest rates. With energy prices rising amid recent Iran-related conflicts and inflation concerns growing, investor sentiment toward long-term bonds has weakened.
The difference was clearly reflected in fund flow figures. BlackRock’s 20Treasury ETF with maturities of years or more has seen 32hundred million dollars in net outflows so far this year. By contrast, BlackRock’s 0~3month-maturity Treasury ETF has attracted 222hundred million dollars, the largest inflow among bond ETFs so far this year.
A shift of investor funds into short-term bond products is being observed. This trend reflects a growing preference for pursuing short-term returns and low price volatility at the same time. It remains to be seen whether sentiment changes as fund flows and interest-rate announcements unfold.
Sources: 뉴시스 경제
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