Greece Standoff Gives Treasury ETF a Break From Record Outflows

ETF Flows

Drama in Greece helped halt an outflow of cash from the biggest U.S. government bond exchange-traded fund last month.

When negotiations between Greece and its creditors got bumpy last week, investors marching into safe assets such as Treasuries gave the iShares 20+ Year Treasury Bond ETF its longest string of daily inflows in more than a year, according to data compiled by Bloomberg. Deposits to the fund came after rising bond yields amid improving economic data prompted three straight weekly redemptions earlier in June.

“Investors are looking for protection, and taking risk off in favor of safer investments,” said Eric Mustin, vice president of ETF trading at WallachBeth Capital LLC in New York.

The inflows show Treasuries remain a haven in times of market stress, even as the Federal Reserve gets closer to raising interest rates for the first time since 2006. The ETF held up better than other funds that own riskier, lower-rated debt, which had their worst monthly outflows ever.

The iShares fund brought in $70 million of investor cash Tuesday, its seventh straight daily inflow. For the week, it attracted $481 million, the most of any bond ETF, according to Bloomberg data.

That left the fund with a June outflow of $130 million, less than the $1.2 billion it lost the month before. It had its worst quarterly outflow ever for the three months ended June 30, with investors withdrawing a net $1.3 billion.

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Treasuries haven’t exactly been popular in recent months, as investors have sold government-bond ETFs in anticipation of rising interest rates.

“I don’t think people are panicking just yet” about Greece, since that would have driven a bigger sum of money into the fund, Mustin said. Instead, “they’re starting to be more cautious about riskier yield-seeking investments.”

Those investments include high-yield bond ETFs, which fared much worse in June. Investors yanked $1.8 billion of cash from the iShares iBoxx $ High Yield Corporate Bond ETF. They withdrew $1.4 billion from the SPDR Barclays High Yield Bond ETF.

Both funds had their worst monthly outflows in June since their inception in 2007. In all, bond ETFs lost $1.6 billion last month, according to Bloomberg data, and high-yield funds lost $3.5 billion of investor cash.

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