Industry Updates

BlackRock’s euro corporate bond ETF kicks off 2024 with $2bn inflows

Investors are estimating up to six ECB rate cuts this year

Theo Andrew

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BlackRock’s euro corporate bond ETF has extended its hot streak into 2024 after raking in over $2bn of assets in the first three weeks of the year.

Investors poured $2.1bn into the iShares Core € Corp Bond UCITS ETF (IEAC) since the turn of the year to 23 January, according to data from ETFbook, as they continue to bet on numerous European Central Bank (ECB) rate cuts throughout 2024.

It comes after IEAC recorded the second-highest inflows of any ETF in Europe last year, pulling in $5bn. The ETF now houses $19.6bn assets under management.

IEAC, which has an effective duration of 4.4 years, returned 8% in 2023. However, the inflows come despite a tough start to the year for the asset class, with IEAC falling 2.3% year to date.

Demand was seen across other euro corporate bond ETFs in Europe with money markets expecting the ECB to cut rates by as much as 157 basis points (bps) this year, roughly six cuts of 25bps each.

The $5.4bn Amundi Index Euro Corporate SRI UCITS ETF (ECRP) saw inflows of $218m over the same period, while the iShares € Corp Bond ESG UCITS ETF (SUOE) recorded inflows of $162m.

The attractive yields on offer combined with a structurally shorter duration versus US bonds could also be seen as a key driver.

Oliver Eichmann, head of rates fixed income EMEA at DWS, said: "Experience shows that low growth rates and the prospect of interest rate cuts are a good environment for investment-grade corporate bonds.

“Our favourites are euro investment-grade corporate bonds. Favourable valuations and high yields should attract more capital. Interest rate premiums are likely to fall somewhat.”

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