ETF Snapshot: EMD Only Fixed Income Asset Class To Record Outflows

According to data from TrackInsight, emerging bond ETFs saw outflows of €430m compared to inflows of €108m the week prior.

The outflows come after new Federal Reserve Chairman Jerome Powell signalled the central bank could hike rates more than the three times this year anticipated, typically a negative indicator for emerging markets.

With the Consumer Price Index (CPI) remaining unchanged over the last 12 months at 2.1%, outpacing consensus estimates of 1.9%, markets are now pricing in a 30% chance of four rate rises this year, almost triple the levels seen at the start of the month, while attaching a 70% chance of three hikes by the end of the year.

However, this had little impact on sentiment towards emerging market equities with Asian large caps and emerging stocks posting inflows of €35m and €337m, respectively.

Following outflows of €939m the week previously, investors appeared unconcerned about the impact of President Donald Trump's trade stance on US large caps, which witnessed the strongest inflows of the week at €4.3m.

Small caps were the only equity asset class to see negative flows with outflows of €993m while European large caps and global stocks were both in the black with inflows of €29m and €711m respectively.

Developed investment grade and developed government bonds yet again posted inflows of €633m and €1.1bn while there were rare inflows for developed high yield bonds, which reversed seven weeks of outflows with €378m of inflows.

This comes when demand to short the three largest exchange-traded funds tracking high yield bonds hit over $7bn in the week ending 2 March, the highest on record, according to Bloomberg.

Trackinsight's data covers both US and European-listed ETFs that in combination make up around 70% of the total market.