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Funds Flow Into Bond ETFs -- WSJ

The Wall Street Journal · 01/06/2023 11:09

By Matt Wirz

Cash flowed into bond ETFs this week and out of stock funds, in a sign that institutional investors again see fixed-income as a potential haven if the U.S. economy tips into recession this year. Asset managers often use bond ETFs to rapidly boost or lower exposure to bond markets.

Fixed-income ETFs raked in $7.4 billion in the seven days ending January 4, the highest level in six weeks, while stock ETFs lost $3 billion, according to CreditSights Inc. The bulk of the money went to long-duration markets like Treasurys and municipal bonds, but flows into corporate credit ETFs were also positive.

Some investment firms like Blackrock are calling for corporate bonds to outperform (https://www.wsj.com/livecoverage/stock-market-news-today-01-03-2023/card/bonds-to-beat-stocks-in-2023-blackrock-MhXfhvSzwHB9aCDA10rA) this year because of their relatively high yields and borrowers' strong balance sheets.

Investment-grade ETFs got $419 million of net inflows after two weeks of outflows and junk bond ETFs took in $138 million. The fund flows coincided with a surge in junk-bond trading on Wednesday, according to CreditSights.

Bond mutual funds experienced outflows, but at a slower pace than in late December, indicating that retail investors may be turning less bearish on the market, which suffered heavy losses last year.

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January 06, 2023 11:09 ET (16:09 GMT)

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