ETF buyers flock to Treasury funds for safety

Italy’s political turmoil has ETF investors tracking U.S. Treasurys as they wait for the market to find its direction with yields and stock market volatility whipsawing.

Vanguard, Blackrock and State Street have 83% of U.S. ETF assets, 50% of total ETF revenue and own the 50 largest ETFs.
A trader works on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on Friday, May 5, 2017. U.S. stocks fluctuated with the dollar and Treasuries as a rebound in hiring added to optimism that the economy is on firm footing, boosting speculation the Federal Reserve will raise interest rates. Photographer: Michael Nagle/Bloomberg

Investors added more than $636 million to the Schwab U.S. TIPS ETF (SCHP) on Tuesday, the most ever for the fund and more than triple the second-largest inflow since its inception.

The fund tracks an index of U.S. Treasury inflation-protected securities that have at least one year remaining in maturity.

The Schwab Intermediate-Term U.S. Treasury ETF (SCHR) took in over $475 million on Tuesday, also a record for the fund. It tracks an index of U.S. Treasury bonds with remaining maturity of three to 10 years.

“It’s definitely a flight to safety,” Aaron Clark, portfolio manager at Boston-based GW&K Investment Management, said. “Some memories are fresh with Greece and the issues that Europe was having in general, and the U.S. is always a sort of quality trade in scenarios like that.”

But with yields now climbing and volatility calming, it remains to be seen how ETF investors reacted to the reversal.

Bloomberg News
ETFs Asset managers Volatility Asset managers Bonds Securities Charles Schwab Money Management Executive
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