Investors Invest In Longer Term Treasury ETFs As Bond Yields Fall

July 9 (Reuters) – According to BlackRock ETF provider iShares, the recent rally in the price of U.S. government debt has resulted in flows to exchange-traded funds following longer-term Treasuries.

IShares 20+ Treasury Bond ETF (TLT.O) has attracted $ 1.4 billion in inflows in the past three weeks through Thursday, with around $ 447 million added last week.

By comparison, investors withdrew $ 547 million from the iShares 7-10 Year Treasury Bond ETF (IEF.O) over the same time period, according to iShares fixed income investment strategist Dhruv Nagrath.

“We see the balance of risk tilting towards higher returns as markets continue to factor in the economic recovery,” he said.

After sharp declines earlier in the year, Treasuries have rallied in recent weeks, knocking the benchmark 10-year yield down to 1.25% on Thursday.

Nagrath of BlackRock noted that recent declines in equilibrium inflation rates have increased flows to short-dated TIPS inflation-linked bond funds, with these ETFs adding $ 7.7 billion in 2021.

In total, iShares Treasury funds attracted $ 801 million in net inflows. However, funds reflecting corporate debt were in higher demand as investors sought higher yielding assets.

IShares ETFs focused on quality corporate debt have seen an inflow of $ 873 million, while funds seeking high-yield ‘junk’ bonds have added $ 1.3 billion since mid-June, according to iShares data.

The iShares iBoxx USD High Yield Corporate Bond ETF (HYG.P) was the biggest beneficiary, attracting inflows of over $ 700 million. HYG shares hit $ 88 last week, levels last seen before the coronavirus-induced sell off in March 2020.

Globally, bond funds saw their biggest weekly inflow in more than three months, according to data from Refinitiv Lipper. Read more

Reporting by Lisa Pauline Mattackal in Bengaluru; Editing by Devika Syamnath and Diane Craft

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