Industry Updates

Investors pile into government bond ETFs as Omicron variant spooks global markets

Four government bond ETFs recorded over $100m inflows last week

Theo Andrew


Investors piled into government bond ETFs last week as interest rate volatility and the new COVID-19 variant spook global markets.

According to the Bank of America (BoA), government bond funds recorded $1.2bn inflows in the week ending 24 November with several eurozone government bond ETFs recording triple-digit inflows over the period.

Inflows into the risk-off assets were matched by $145m outflows in equity ETFs last week, as investors reacted to the potential impact of the Omicron coronavirus variant on global economies as fresh travel bans were imposed by many countries.

Leading the flows charts was the Xtrackers Eurozone Government Bond UCITS ETF (XGLE) which recorded $222m inflows, according to data from Ultumus, while the Lyxor Euro Government Bond 1-3Y UCITS ETF (MTA) saw an asset influx of $153m.

In addition, the Amundi Index J.P. Morgan EMU Govies IG UCITS ETF (EGOV) inflows totalled $139m over the period.

Elsewhere, the $825m iShares $ Treasury Bond 7-10yr UCITS ETF (CBOU) saw inflows of $113m with its short-dated compatriot, the $3.5bn iShares $ Treasury 1-3yr UCITS ETF (IBTS), drawing in $77m.

The SPDR Barclays 1-5 Year Gilt UCITS ETF (GLTS) also recorded strong inflows of $87m over the week.

Despite the pickup of inflows into government bond ETFs last week, the trend has been ongoing for two months as investors anticipate a rate rise in the face of rising inflation. 

“Government bond funds saw their largest inflow in four weeks and the ninth in a row,” Ioannis Angelakis, credit derivatives strategist at Bank of America, said. “As rates market volatility has remained relatively elevated over the past weeks, inflows into high-grade funds have lagged inflows seen into high-yield and government bond funds.”

Investors also looked to de-risk their fixed income portfolios, with high yield ETFs posting outflows of $34m last week.

The iShares € High Yield Corp Bond UCITS ETF (IHYG) saw an asset exodus of $148m, while the Xtrackers USD High Yield Corporate Bond UCITS ETF (XUHY) recorded $66m outflows.

Elsewhere, investment grade bond ETF inflows totalled $126m last week with the iShares € Corp Bond 1-5yr UCITS ETF (SE15) recording $162m inflows.

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