ETF Snapshot: Government Bonds See Outflows Amid Rising Rate Environment
ETF watch
In the week ending 3 November, developed government bonds reversed three weeks of inflows, according to data from TrackInsight, following the first rate hike in a decade from the Bank of England.
Government bond ETFs witnessed outflows of €449m at the end of last month, following €1.8bn inflows over the three previous weeks.
In what is typically seen as negative for government bonds, the Bank of England (BoE) raised interest rates by 25 basis points (bps) to 0.5% last week following "stronger than expected" UK economic growth.
Furthermore, the European Central Bank (ECB) halved its bond-buying programme from €60bn to €30bn a month on 26 October, and the Federal Reserve has already begun hiking rates and reducing its €4.5trn balance sheet.
By comparison, other fixed income asset classes were in the black, with investment grade bonds recording €390m inflows while high yield bonds and emerging market bonds received inflows of €55m and €187m, respectively.
In the equity space, US large caps continued to post strong inflows of €1.1bn closely followed by global stocks, which also saw €1.1bn inflows.
European large-cap ETFs improved on the €2m inflows last week with flows of €630m while small caps saw €205m inflows. In emerging markets, Asian large caps saw inflows of €60m while emerging market stocks overall posted €423m inflows.
TrackInsight's data covers both US and European-listed ETFs that in combination make up around 70% of the total market.
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