Back to top

Image: Bigstock

ETF Asset Report of February: Short-Term Bonds Win

Read MoreHide Full Article

Wall Street was downbeat in February on rising rate worries. Reaccelerating inflation data released for the month of January as well as upbeat economic data points triggered bets for a more hawkish Fed this year.

Consumer price index and the Fed’s preferred inflation gauge PCE – both came in upbeat for January, which is an alarming sign for Wall Street. The S&P 500 was off 2.6%, the Dow Jones lost about 4.2%, the Nasdaq retreated about 1.1% and the Russell 2000 slid about 1.8% past month (as of Feb 28, 2023).

Against this backdrop, below we highlight the asset report of February.

Short-Term Treasury Bonds Win

iShares Short Treasury Bond ETF (SHV - Free Report) , iShares 0-3 Month Treasury Bond ETF SGOV and SPDR Portfolio Short Term Treasury ETF (SPTS - Free Report) amassed about $4.52 billion, $1.58 billion and $1.45 billion in assets in the month, respectively.

The Fed has hiked interest rates several times in February.  The benchmark U.S. treasury yield was 3.39% at the start of the month while it was 3.92% at the end of Feb 28, 2023. The six-month U.S. treasury yield was 4.79% at the start of February while it was 5.17% as on Feb 28, 2023. This made short-term U.S. treasury ETFs a high-yielding option. Moreover, short-duration bonds have low interest rate risks.

Europe ETF Was Investors’ Favorite

JPMorgan BetaBuilders Europe ETF (BBEU - Free Report) has fetched in about $2.10 billion in assets. Signs of easing inflation have boosted European markets lately. This has probably prompted investors toward the Europe Investing.

Total Bond & Total Stock Markets Popular Too  

Vanguard Total Bond Market ETF (BND - Free Report) and Vanguard Total Stock Market ETF (VTI - Free Report) hauled in about $1.69 billion and $1.61 billion, respectively, in February. Vanguard S&P 500 ETF (VOO - Free Report) gathered about $1.65 billion in assets in the month. Investors probably sought shelter under the safety of broader ETFs as market environment remains volatile due to rising rate worries.  

Dividends Continue to Rule  

Schwab U.S. Dividend Equity ETF (SCHD - Free Report) fetched in about $1.35 billion in assets. The fund offers exposure to high dividend yielding stocks issued by U.S. companies that have a record of consistently paying dividends. This kind of ETFs generally acts as a hedge against economic uncertainty and provide downside protection by offering outsized payouts or sizable yields on a regular basis. Additionally, dividend aristocrats tend to skew the portfolio to low volatile sectors and mature companies.

High-Yield Corporate Bonds Bleed Assets

iShares iBoxx USD High Yield Corporate Bond ETF (HYG - Free Report) , iShares iBoxx USD Investment Grade Corporate Bond ETF (LQD - Free Report) and SPDR Bloomberg High Yield Bond ETF (JNK - Free Report) have lost assets worth of$5.13 billion, $4.63 billion and $2.21 billion, respectively, in February. As yields on short-term treasuries have jumped, investors probably dumped risky high-yield corporate bond ETFs (as the latter has higher probability of defaulting).   

Emerging Markets Underperform

iShares JP Morgan USD Emerging Markets Bond ETF (EMB - Free Report) and iShares MSCI Emerging Markets Min Vol Factor ETF (EEMV - Free Report) shed about $1.90 billion and $1.28 billion in assets, respectively, in February. As rising rate risks grew and the greenback gained strength (up 3.1% past month), emerging market assets started falling out of favor. Higher rates in the United States, the dollar strength and capital outflows are negative for the emerging market space.


Published in