Investors Pour Billions To Aggressive Bond ETFs, Banking On Multiple Fed Rate Cuts in 2024

In recent weeks, several bond exchange-traded funds (ETFs) have experienced a significant surge in inflows, indicating a heightened interest among investors.

This shift coincided with a market that significantly upped bets on Federal Reserve rate cuts for 2024, backed by a robust and ongoing disinflationary trend in the U.S. economy.

Speculators have gone as far as factoring in an initial rate cut as early as March 2024, with whispers of a total of five rate cuts by December 2024.

But which bond ETFs are currently piquing investors’ interest?

From ‘Cash-Like’ to ‘Equity-Like’

While the third quarter in 2023 witnessed a notable uptick in inflows into cash-linked bond ETFs, primarily those investing in short-dated Treasury bonds and bills, the latest trends are veering towards more aggressive fixed-income strategies.

Investors are strategically positioning themselves in anticipation of an imminent U-turn in Fed’s monetary policy stance, eyeing a select group of bond ETFs that have weathered the storm during the recent spate of interest rate hikes.

Their bullish stance on riskier bond ETFs underscores a burgeoning belief that the bond market landscape could undergo a substantial recalibration in the coming months, as they brace for a more accommodating monetary policy environment.

These ETFs encompass a diverse range, including long-term Treasury bonds, emerging-market bonds, and high-yield corporate bonds.

Top 10 Bond ETFs by Fund Inflows in the Past Month

Name	Fund Flows (1-month)
iShares Trust – iShares iBoxx $ High Yield Corporate Bond ETF HYG	$3.69 bn
iShares Trust – iShares Core U.S. Aggregate Bond ETF AGG	$2.62 bn
SPDR Series Trust – SPDR Bloomberg High Yield Bond ETF JNK	$1.99 bn
iShares Trust – iShares J.P. Morgan USD Emerging Markets Bond ETF EMB	$1.89 bn
iShares Trust – iShares 20+ Year Treasury Bond ETF TLT	$1.62 bn
Vanguard Bond Index Funds – Vanguard Total Bond Market ETF BND	$1.56 bn
iShares Trust – iShares Broad USD High Yield Corporate Bond ETF USHY	$1.31 bn
Vanguard Scottsdale Funds – Vanguard Long-Term Treasury ETF VGLT	$665.99 bn
Vanguard Charlotte Funds – Vanguard Total International Bond ETF BNDX	$641.06 bn
iShares Trust – iShares 5-10 Year Investment Grade Corporate Bond ETF IGIB	$216.67 bn

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