Rieger Report®: Bond ETF Flow Report May 2019

May 2019 Bond ETF Flow Report:

What are the May 2019 Bond ETF Flows Telling Us?

  • May 2019 has been a risk off month as equity volatility, global geopolitical risk and trade discussions elevate concerns for the US economy.
  • The bond ETFs that collected the most assets were the composite investment grade USD based bond indices including Vanguards BND and iShares AGG. Opportunity? Yield compression has taken prices higher. No need to chase this segment higher.
  • Large outflows were seen in the USD high yield bond ETFs with both iShares HYG and SPDRs JNK each seeing outflows over $1.2billion in May alone. Opportunity? Looking for rising yields which could create a buy opportunity for these ETFs and go against the grain at that point.
  • USD denominated emerging market bonds also were out of favor as iShares EMB saw outflows of over $1.1billion. Opportunity? Would like to see yields rise higher before taking on the incremental risks of this sector.
  • The largest senior loan ETF, Invesco’s BKLN has seen dramatic outflows at month end netting out to $467million for the month. Opportunity? With the Fed holding rates down and no end in sight, floating rate senior loans lose a lot of appeal. Loans being out of favor in this circumstance creates a tactical opportunity to pick up some short duration higher yielding assets.

Bond ETF Flows May 2019:

Top Five Inflow ETFs

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Bottom Five Outflows

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Sources: First Bridge Data. Table is provided for illustrative purposes only. Past performance is not a guarantee of future results. Data as of 5/31/2019.

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