Even though bonds have staged an impressive rally throughout January of this year, with benchmark ETFs such as TLT (iShares Barclays 20+ Year Treasury Bond, Expense Ratio 0.15%), which had a $101 handle in late 2013 trading as high as $108.15 yesterday, we continue to see evidence of institutional buying in the space, even at these price levels.
In the past couple sessions, BND (Vanguard Total Bond Market, Expense Ratio 0.10%) is the net leader across all U.S. listed ETPs in net inflows, reeling in approximately $1.1 billion in new assets.
This adds to an already impressive asset base of about $18.3 billion in this fund currently, making it the largest “Total Bond Market” focused ETF in the product landscape. AGG (iShares Core Total U.S. Bond Market, Expense Ratio 0.08%) is a reasonably close second in terms of AUM, with $15.4 billion in AUM, and should also be monitored closely here for signs of inflows.
The concept of Total Bond Market in this case refers to these funds investing in, according to ETF Database, “public, investment-grade, taxable, fixed income securities in the U.S., including government, corporate, and international dollar-denominated bonds, as well as mortgage-backed and asset-backed securities, all with maturities of more than 1 year.”
Currently, BND is tilted as such, 40.6% Government bonds, 23.12% Corporate Bonds, 22.53% Agency Mortgage Backed Bonds, and the rest of the portfolio is allocated across Government Related, Cash And Equivalents, Commercial Mortgage Backed, and other categories.
Other funds to keep a close eye on in the Total Bond Market segment amid these recent BND inflows include BSV (Vanguard Short Term Bond, Expense Ratio 0.11%), BOND (PIMCO Total Return, Expense Ratio 0.55%), BIV (Vanguard Intermediate Term Bond, Expense Ratio 0.11%).
BIV has been exceptionally active recently as well, with more than $600 million flowing out of the fund in recent sessions, with more than 5 million shares trading in one session on Monday of this week.
Collectively, the aforementioned funds contain more than $54 billion in assets under management, and amid heavy trading volume as of late, a flurry in activity in the rate markets as well as a host of headlines having to do with the FOMC and the passing of the torch from Bernanke to Yellen, there is no reason to believe that the activity in these funds will settle down anytime soon.
Vanguard Total Bond Market ETF
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