Investors are snapping up exchange-traded bond funds (ETFs) at the fastest rate since the launch of the first bond ETF in 2002, according to TrimTabs Investment Research.
Bond ETFs listed on U.S. exchanges have seen an inflow of $16 billion this month through Feb. 21, amounting to nearly twice the previous top monthly inflow of $8.4 billion in May 2012, the firm said this week.
The interest has been sparked by uncertain economic data, volatility in emerging markets and a desire for income-generating investments.
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Among those investors adding to their bond ETF holdings this month were David Fabian, managing partner of FMD Capital Management, Irvine, Calif., who increased his clients' holdings of iShares J.P. Morgan USD Emerging Market Bond ETF.
Part of the inflow also came from Chicago-based Good Harbor Financial, which allocated about $7 billion for bond ETFs at the beginning of this month.
ETFs that invest in Treasurys have seen the most inflow. Many bond market investors thought that U.S. Treasury yields would increase this year as the Federal Reserve began tapering its monthly bond buying purchases.
But in the wake of some weaker than expected economic data, the benchmark 10-year yield has declined. After closing at 3.03 percent at the end of last year, the 10-year Treasury yield stood at 2.7 percent midday Wednesday. Still, it has increased six basis points, or 0.06 percent, this month.
The biggest gainers have included the iShares 3-7 Year Treasury Bond ETF, which has more than doubled in size to $6.3 billion after receiving $3.8 billion so far this month.
The iShares ETFs are managed by BlackRock, the largest ETF provider.
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