Corporate Bond ETFs Attract Steady Inflows Amid Bond Market Sell-Off

by: AdvisorShares

Minyi Chen, CFA, Chief Operating Officer of TrimTabs Investment Research and Portfolio Manager of AdvisorShares TrimTabs Float Shrink ETF (NYSEARCA:TTFS) shares recent fund flow trends.

Corporate bonds remained popular with investors amid the bond sell-off in recent months, while Foreign and Municipal bond funds experienced the steadiest and heaviest redemptions.

Despite yields near record lows, corporate bond ETFs have been extremely popular, issuing $3.7 billion (4.9% of assets) in the past month and $9.0 billion (12.0% of assets) in the past three months. Corporate bond MF flows have been pretty flat recently.

By contrast, Foreign bond funds and Municipal bond funds experienced the heaviest redemptions. Foreign bond ETFs $833 million (5.1% of assets) in the past three months, while Municipal bond ETFs redeemed $870 million (8.1% of assets). Note that municipal bond MFs and ETFs have both been posting steady outflows since early June, well before Detroit's bankruptcy filling.

The Treasury bond MFs we track daily redeemed $4.7 billion (2.6% of assets) in the past month, continuing a trend of redemptions that began in late May. Treasury bond ETF flows have been far more erratic, but they too have been posting outflows in recent months. They redeemed $2.0 billion (1.8% of assets) in the past three months.

New Offerings Much Lower Than We Had Expected This Week. Dealogic Reports $1.1 Billion Scheduled for Wednesday and $1.8 Billion Scheduled for Thursday.

The pullback in stock prices in the wake of the Federal Open Market Committee meeting seems to be putting a damper on equity issuance, which is good news for the bulls. In addition to the $1.8 billion priced Friday through Tuesday, Dealogic reports that $1.1 billion is scheduled for Wednesday-led by a $250 million follow-on for AltisourceResidential-and $1.8 billion is scheduled for Thursday-led by an $800 million IPO for Premier and a $350 million IPO for Pattern Energy Group. Unless some big overnight deals materialize, this week's volume may not be much higher than $6 billion, which would be the lowest level in three weeks.
With four trading days of data left, this month's volume already stands at $22.0 billion, so this month's volume is likely to be the highest since May. Nevertheless, a pace of $1.4 billion daily is nothing unusual by historical standards.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Business relationship disclosure: AdvisorShares is an SEC registered RIA, which advises to actively managed exchange traded funds (Active ETFs). This article was written by Minyi Chen, CFA the portfolio manager of the AdvisorShares TrimTabs Float Shrink ETF (TTFS). We did not receive compensation for this article, and we have no business relationship with any company whose stock is mentioned in this article. This information should not be taken as a solicitation to buy or sell any securities, including AdvisorShares Active ETFs, this information is provided for educational purposes only.

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