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Most Loved/Hated ETFs Amid the Height of Banking Crisis

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Wall Street has been busy with the banking crisis in the past 10 days and even impacted the global markets adversely. It all started with the failure of Silicon Valley Bank (SVB) and Signature Bank. The run SVB started on Mar 9, after the bank’s strategic update to investors on Mar 8 revealed that it had sold substantially all of its Available for Sale securities portfolio of $21 billion, most of which were US treasury bonds.

SVB had locked these treasuries at a yield of 1.79% and had to book a loss of $1.8 billion on this transaction due to spike in Fed Funds rates past year. Clients started withdrawing their deposits. The very news crashed SVB stock, sending ripple effects across the banking industry.

U.S. regulators shut the bank down. It is the second-largest bank failure in U.S. history. Then, Signature Bank customers withdrew more than $10 billion in deposits, leading the U.S. regulators to seize Signature Bank in third-biggest bank failure in U.S. history.

If this was not enough, First Republic Bank, which was walking the same route of its failed peers, secured a rescue package of $30 billion from a group of America’s largest banks. But shares have still been under pressure, at the time of writing.

The crisis shook the global markets also as European equities slumped last week the most since mid-December. Like U.S. banking, European banking sector was hit severely. The center of crisis across the pond was Credit Suisse. The bank has also been facing the cash crunch. Finally, UBS has agreed to buy the struggling Credit Suisse for more than $3 billion in a historic deal.

S&P 500 ETF (SPY - Free Report) lost 1.9% since Mar 8, SPDR Dow Jones Industrial Average ETF Trust (DIA - Free Report) retreated 2.8% and Invesco QQQ Trust (QQQ - Free Report) slumped 2.5% (as of Mar 17, 2023). Against this backdrop, below we highlight a few ETF areas that amassed most assets or lost since Mar 8 to Mar 17, 2023.

High-Yield Dividend ETF Tops the List

Vanguard High Dividend Yield ETF (VYM - Free Report) amassed about $2.72 billion since Mar 8. The underlying index consists of companies that pay dividends that generally are higher than average. It yields 3.20% annually and charges 6 bps in fees. Such ETF offers safer exposure amid any crisis. Probably this is why, VYM has been investors’ favorite. iShares Select Dividend ETF (DVY - Free Report) too added $2.03 billion in assets.

Treasuries Win Too

Safe haven treasuries like iShares 7-10 Year Treasury Bond ETF (IEF - Free Report) , SPDR Bloomberg 1-3 Month T-Bill ETF (BIL - Free Report) and SPDR Portfolio Intermediate Term Treasury ETF SPTI attracted about$2.21 billion, $2.15 billion and $1.44 billion in assets, respectively.

Total Stock Market ETF Gains

Vanguard Total Stock Market ETF (VTI - Free Report) fetched about $2.18 billion in assets during this time period. Bets over a less hawkish Fed, going forward, probably helped this fund gain assets.

Regional Banks: Is a Winner on Short Covering?

SPDR S&P Regional Banking ETF (KRE - Free Report) hauled in about $1.41 billion in assets. As KRE got a bashing in the peak of the crisis, the fund may have gained assets due to an activity of short covering.  

High-Yield Corporate Bonds Fail

Vanguard Short-Term Corporate Bond ETF (VCSH - Free Report) , iShares iBoxx USD High Yield Corporate Bond ETF (HYG - Free Report) and SPDR Bloomberg High Yield Bond ETF (JNK) lost about $2.39 billion, $1.09 billion and $758.6 million in assets, respectively.

Energy ETF Bleeds Assets

Energy Select Sector SPDR Fund (XLE - Free Report) saw about $1.18 billion in assets in the past 10 days as oil priced slumped on demand concerns.

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