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As has been its reputation, volatility returned in February. Fears of a slowdown in global growth, no significant news toward a resolution in the U.S.-China trade spat, Brexit talks and still-running negotiations between Democrats and Republicans about the passing of the $5.6-billion funding for the Mexico border wall have kept the markets on edge.
In any case, historically, the Valentine month is not favorable for stocks as the S&P 500 has offered negative 0.05% on average since 1950, per moneychimp.com. As volatility flared up, demand for safe-haven assets like U.S. treasuries brightened. This has weighed on bond yields.
Dovish comments made by the Fed this year also helped in keeping the rise in bond yields at check. The yield on benchmark U.S. Treasury was 2.65% on Feb 7 versus 2.70% at the start of the month.
The net result has been investors’ love for bond ETFs in the Valentine month thanks to the search of current income as well as relative safety. They have already poured billions into different kind of bond products so far this month (as of Feb 6, 2019). High-yield "junk" bond funds amassed about $3.9 billion during the seven days ended Fe. 6, the maximum since July 2016, per Lipper data.
Let’s have a look.
International Bonds Rule
Vanguard Total International Bond ETF (BNDX - Free Report) has amassed about $1.30 billion in assets so far this month as international bond yields took a sharp dive. The fund invested 56% in Europe followed by 27.4% in Pacific and 8.6% in North America. It yields 2.99% annually.
German bond yields slumped to a two-year lows after European Commission cut 2019 growth forecasts for the region citing weakness in big economies. Even investors are swarming around Japan’s negative-yield bonds thanks to dovish central banks. Overseas investors bought 638.3 billion yen ($5.8 billion) of Japanese bonds in five days through Feb 1.
Emerging Markets: Bonds & Equities Hot
Since the greenback has remained range-bound of late on dovish Fed minutes, scope for emerging market investments has brightened. Plus, talks of U.S.-China trade negotiations have given a boost to the segment. An oil price rally has also been benefiting the segment. So, investors have tapped higher-yielding emerging market securities this month.
iShares JP Morgan USD Emerging Markets Bond ETF (EMB - Free Report) ,which yields about 5.53% annually, has already attracted about$1.15 billion in assets. Equity ETFs like iShares MSCI Emerging Markets ETF (EEM - Free Report) ,Vanguard FTSE Emerging Markets ETF (VWO - Free Report) and iShares Core MSCI Emerging Markets ETF (IEMG - Free Report) havepulled in about $767.2 million, $721.0 million and $491.7 million in assets in the month, respectively (read: EM Equities ETFs Off to a Great Start in 2019: Here's Why).
Sturdy Real Estates Sector
As bond yields slumped, rate-sensitive sector ETFs like real estate surged. This is especially true given U.S. economic momentum has been pretty steady, which in turn should create higher demand for real estate. Vanguard Real Estate ETF (VNQ - Free Report) and iShares U.S. Real Estate ETF (IYR - Free Report) have amassed about $917.2 million and $742.4 million so far this month, respectively (read: Why Real Estate ETFs are Beating the S&P 500).
U.S. Corporate Bonds Prevail
Demand for solid current income and upbeat earnings season have probably drove investors toward this space.Corporate bond ETFs like iShares iBoxx USD High Yield Corporate Bond ETF (HYG - Free Report) (yields 5.31% annually), iShares iBoxx USD Investment Grade Corporate Bond ETF (LQD - Free Report) (yields 3.59% annually) and SPDR Bloomberg Barclays High Yield Bond ETF (JNK - Free Report) (yields 5.62% annually) have hauled in about $583.4 million, $556.1 million and $493.8 million in assets, respectively, in the month (read: Most Loved and Hated ETFs of 2018).
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4 ETF Areas Getting All Love in Valentine Month
As has been its reputation, volatility returned in February. Fears of a slowdown in global growth, no significant news toward a resolution in the U.S.-China trade spat, Brexit talks and still-running negotiations between Democrats and Republicans about the passing of the $5.6-billion funding for the Mexico border wall have kept the markets on edge.
In any case, historically, the Valentine month is not favorable for stocks as the S&P 500 has offered negative 0.05% on average since 1950, per moneychimp.com. As volatility flared up, demand for safe-haven assets like U.S. treasuries brightened. This has weighed on bond yields.
Dovish comments made by the Fed this year also helped in keeping the rise in bond yields at check. The yield on benchmark U.S. Treasury was 2.65% on Feb 7 versus 2.70% at the start of the month.
The net result has been investors’ love for bond ETFs in the Valentine month thanks to the search of current income as well as relative safety. They have already poured billions into different kind of bond products so far this month (as of Feb 6, 2019). High-yield "junk" bond funds amassed about $3.9 billion during the seven days ended Fe. 6, the maximum since July 2016, per Lipper data.
Let’s have a look.
International Bonds Rule
Vanguard Total International Bond ETF (BNDX - Free Report) has amassed about $1.30 billion in assets so far this month as international bond yields took a sharp dive. The fund invested 56% in Europe followed by 27.4% in Pacific and 8.6% in North America. It yields 2.99% annually.
German bond yields slumped to a two-year lows after European Commission cut 2019 growth forecasts for the region citing weakness in big economies. Even investors are swarming around Japan’s negative-yield bonds thanks to dovish central banks. Overseas investors bought 638.3 billion yen ($5.8 billion) of Japanese bonds in five days through Feb 1.
Emerging Markets: Bonds & Equities Hot
Since the greenback has remained range-bound of late on dovish Fed minutes, scope for emerging market investments has brightened. Plus, talks of U.S.-China trade negotiations have given a boost to the segment. An oil price rally has also been benefiting the segment. So, investors have tapped higher-yielding emerging market securities this month.
iShares JP Morgan USD Emerging Markets Bond ETF (EMB - Free Report) ,which yields about 5.53% annually, has already attracted about$1.15 billion in assets. Equity ETFs like iShares MSCI Emerging Markets ETF (EEM - Free Report) ,Vanguard FTSE Emerging Markets ETF (VWO - Free Report) and iShares Core MSCI Emerging Markets ETF (IEMG - Free Report) havepulled in about $767.2 million, $721.0 million and $491.7 million in assets in the month, respectively (read: EM Equities ETFs Off to a Great Start in 2019: Here's Why).
Sturdy Real Estates Sector
As bond yields slumped, rate-sensitive sector ETFs like real estate surged. This is especially true given U.S. economic momentum has been pretty steady, which in turn should create higher demand for real estate. Vanguard Real Estate ETF (VNQ - Free Report) and iShares U.S. Real Estate ETF (IYR - Free Report) have amassed about $917.2 million and $742.4 million so far this month, respectively (read: Why Real Estate ETFs are Beating the S&P 500).
U.S. Corporate Bonds Prevail
Demand for solid current income and upbeat earnings season have probably drove investors toward this space.Corporate bond ETFs like iShares iBoxx USD High Yield Corporate Bond ETF (HYG - Free Report) (yields 5.31% annually), iShares iBoxx USD Investment Grade Corporate Bond ETF (LQD - Free Report) (yields 3.59% annually) and SPDR Bloomberg Barclays High Yield Bond ETF (JNK - Free Report) (yields 5.62% annually) have hauled in about $583.4 million, $556.1 million and $493.8 million in assets, respectively, in the month (read: Most Loved and Hated ETFs of 2018).
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>