ETF Snapshot: High Yield ETFs Only Asset Class To Record Outflows

Investors' appetite for riskier debt disappeared during the week with developed high yield bonds posting €1.8bn in outflows, according to data from TrackInsight.

BlackRock's iShares iBoxx $ High Yield Corporate Bond ETF saw $568m outflows on 18 January, the largest daily outflow since June, according to Bloomberg.

Concerns over the potential for higher interest rates and a government shutdown in the US led 10-year Treasury yields to rise 2.4 basis points to 2.64% in intra-day trading last Friday, the highest point since September 2014.

High yield and US large-cap ETFs suffer highest outflow levels

The Senate is yet to pass a new budget having fallen 10 votes short of the 60 required to move the bill forward, meaning there will be a shutdown of federal services across the country unless it is resolved.

Alfred Lee, portfolio manager at BMO GAM, told Bloomberg: "Treasury yields are going up, some investors have been rotating into higher quality investment-grade bonds. If Treasuries are paying a bit more, then investors can reduce risk."

Investors continued to pour into developed investment grade and developed government bond ETFs, which saw inflows of €1.7bn and €1bn respectively, while emerging bonds built on the €1.1bn inflows the previous week with positive gains of €719m.

In the equity space, US large caps witnessed the strongest inflows with €7.4bn as investors continued to remain bullish about the asset class following President Donald Trump's Tax Cuts and Jobs Act reform, which will see corporate tax cut from 35% to 21%.

Global stocks were a distant second with €2.4bn inflows while small caps and European large caps recorded positive flows of €824m and €727m respectively.

In the emerging market space, Asian large caps and emerging stocks were both in the black with inflows of €151m and €2.4bn.

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