Investors poured a massive $1.216 billion into the iShares Barclays 3-7 Year Treasury Bond Fund (IEI) Wednesday, bumping the fund’s total assets by 53 percent to $3.5 billion in one day.
IEI’s sudden popularity—which, notably, wasn’t matched by demand for other bond funds exhibiting similar maturity profiles, such as the Pimco 3-7 Year U.S. Treasury (FIVZ)—seems to reflect a broader trend of institutional money finding its way into lower-cost, liquid bond funds in ETF wrappers.
More specifically, though, while investors have recently been keen on upping exposure to the short end of the yield curve in Treasurys, as they look for protection from likely higher rates ahead, IEI’s midterm duration is in line with current duration of the U.S. Aggregate Bond index.
This week’s Federal Reserve stance that it plans to stay the course when it comes to monetary policy might also have had something to do with demand for IEI, as investors find encouragement to “ride the interest-rate risk.”
That means there isn’t that much more risk involved at this point with owning IEI than debt on the shorter end of the yield curve, IndexUniverse’s ETF analyst Gene Koyfman said.
That’s especially true given that yields on the short end of the curve have nowhere to go since they’re already near zero, and are in fact negative on a “real” basis after accounting for inflation, he noted.
IEI’s 30-day SEC yield is currently pegged at 0.54 percent—the SEC yield being the standardized yield calculation that reflects the interest earned in the period after expenses, iShares said on its website.
By comparison, 30-day SEC yield on the iShares Barclays Short Treasury Bond (SHV)—with debt maturity pegged at one to 12 months—is currently pegged at 0 percent, and at 0.09 percent for the iShares Barclays 1-3 Year Treasury Bond Fund (SHY).
Still, in terms of year-to-date flows, IEI has attracted a net of about $405 million in the first four months of the year, while SHV has seen net inflows of a whopping $1.60 billion year-to-date, bumping it to $4.18 billion in total assets. SHY, meanwhile, has bled $430 million so far this year.
In all, investors poured nearly $5.6 billion of net assets into U.S. fixed-income ETFs in April, according to data compiled by IndexUniverse.
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