Can ETF investors hold their nerve as bond yields soar?

The duration conundrum

Tom Eckett

Markets chart graph

The rotation to fixed income this year has not been kind to ETF investors so far as 10-year US Treasury yields surged to 16-year highs amid increasing concerns over a hawkish Federal Reserve.

‘Bonds are back’ has been the mantra since the end of last year as investors piled into fixed income ETFs to capture the attractive yields on offer amid a rapidly changing macro landscape. According to data from Morningstar, fixed income UCITS ETFs saw a record €31bn inflows in H1, surpassing the previous record of €30.6bn in 2019.

However, what has largely been touted as the trade of the next decade has been painful for investors, especially those who have been adding duration risk to portfolios...

This article first appeared in ETF Insider, ETF Stream's monthly ETF magazine for professional investors in Europe. To read the full article, click here.


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