Bond ETF Flows Jump-Start the Summer07.24.2019 By John D'Antona Editor, Traders Magazine
The month of June went out with a bang if you were a seller of exchange-traded funds (ETFs.)
Despite global equities rising 6% last month, Both bond and equity ETFs saw ample cash be put to work in those backing classes. Bond ETFs broke records as investors plowed $25 billion in funds in June – a whopping 45% more that their previous best showing back in October 2014.
Bonds. Nothing but bonds?
Equity-backed ETFs were no slouch either – as June saw $20.5 billion in fresh cash enter the sector. However, according to the recent Flash Flows report from State Street Global Advisors, $19.3 billion of that was in U.S. equities.
In speaking with Matthew Bartolini, head of SPDR Americas Research at SSGA, bond ETFs record June haul pushed first half flows to a $74 billion tally for the first six months of the year – new record for any first six-month period.
“What we got was a boost of positive sentiment stemming from frequent dovish FedSpeak and an increasing probability of future rate cuts later this summer,” Bartolini said. “And just like that, one month after posting a 6% loss, global equities rocketed to a 6% gain in June, their best June return ever. Nearly 60% of global stocks now trade above their 50-day moving average, up from just 30% at the end of May.”
But back to bonds. Bartolini noted that even with a 6% rally in global equities, investors allocated a record amount to fixed income ETFs.
“Equity ETFs did garner $20 billion of inflows. However, inflows to bonds were truly out of this world with over $25 billion – a more than 45% increase over the prior record from October of 2014,” he said. “Bonds’ record June haul pushed the first-half figure to $74 billion, which is also a record amount for a first half. This surpassed the $70 billion bond ETFs amassed in 2017, a time period that was aided by regulatory tailwinds emanating from the fiduciary rule that led to all ETFs having a record amount of fund flows once the year was over.”
Also benefiting from solid macro factors and a dovish Fed, as well as a weaker US dollar and over $12 trillion of negative yielding debt saturating the market, gold prices broke through key resistance levels. As a result, gold-backed ETFs took in $2.8 billion in June – their highest inflow since June 2016. Bartolini noted that at that time, the world was whipsawed from the Brexit results and there was also over $12 trillion of negative yielding debt.
At the sector level, Energy ETFs led the pack, attracting $1.3 billion during the month. Real Estate and Consumer Staples ETFs were also favored, attracting $1.1 billion and $1 billion of inflows respectively;
High Yield ETFs attracted a healthy $4 billion of inflows in June, pushing their year-to-date total to almost $10 billion.
Looking ahead, Bartolini said the Communication Services is a sector to watch next. Bellwether names, he began, reside in the segment and earnings season is upon the market.
“Last season, the sector saw the second-highest magnitude of earnings beats, and it is only one of the three sectors that have witnessed more upgrades relative to downgrades to their full-year 2019 earnings estimates,” Bartolini said.
Investors lack confidence in fixed income data and believe only half is really reliable.
The EU Parliament’s report substantially extends the coverage of the label.
The Treasury is soliciting public feedback on additional post-trade data transparency.
The future of trading is digital and interoperable.
European government bond trading volumes increased 17.5% year-on-year in the first quarter.