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Posted by on Sep 27, 2013 in AdvisorShares, Investment Perspective, TrimTabs

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

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

Minyi Chen, CFA, Chief Operating Officer of TrimTabs Investment Research and Portfolio Manager of AdvisorShares TrimTabs Float Shrink ETF (NYSE Arca: 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.

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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.

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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.

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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.

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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.

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