Industry Updates

Bond ETFs soar in Q2

George Geddes

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The first half of 2019 has been a particularly bright period for bond ETF issuers as the asset class has pulled in significantly more cash than its equity counterparts, despite the S&P 500 and FTSE 100 having such a positive performance this year.

That being said, the S&P 500 fell 5.9% throughout May this year which resulted in US bond ETFs for June to have its largest monthly inflows for nearly five years.

While bond ETFs come with reduced risk exposure, which is why the S&P 500’s performance in May pushed investors to move capital into the asset class the following month, there has still been a large volume of products which have produced Q2 returns in the double digits.

According to data from Ultumus, the top performing bond ETF, domiciled in Europe, for Q2 was the Xtrackers Eurozone Government Bond 25+ UCITS ETF (DBXG) which saw its Net Asset Value rise 12.6%. Other strong performing bond ETFs include the Lyxor 15+ Investment Grade UCITS ETF (MTF), iShares € Govt Bond 15-30yr UCITS ETF EUR (E20Y) and the SPDR Barclays 10+ Year US Corporate Bond UCITS ETF (SYBN) which increased 10.2%, 8.4% and 7.2%, respectively.

Two bond ETFs saw inflows in excess of $1bn in Q2, both belonging to BlackRock. The iShares Core € Corp Bond UCITS ETF pulled in $1.6bn and the iShares € High Yield Corp Bond UCITS ETF bagged $1.5bn. In fact, BlackRock owned 11 out of the top 15 bond ETFs that received the largest inflows for the period.

It’s not all happy days for BlackRock, however, as the asset management giant also owned some of the worst performing bond ETFs. The iShares $ High Yield Corp Bond UCITS ETF (IHHG) saw its NAV fall 3.6% in Q2 as well as the iShares $ Floating Rate Bond UCITS ETF dipping 3.4%.

One theme which regularly appears at the bottom end of performance table were gilt bond ETFs. The SPDR Barclays 1-5 Year Gilt UCITS ETF (SYB5), iShares Core UK Gilts UCITS ETF (IGLT) and the SPDR Barclays UK Gilt UCITS ETF (SYBG) fell 2.0%, 1.7% and 1.1%, respectively.

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