Ring The Bell: Fixed Income ETFs Hit Record Yearly Flow Total

 US-listed bond ETF assets are now firmly over the $800 billion mark in what has been a banner year for fixed income ETF flows.

Some of the drivers behind the record inflow are liquidity needs and demographics, downside risk mitigation, and the search for yield at any price.

Matthew J. Bartolini, CFA
Head of SPDR Americas Research, State Street Global Advisors

Ring the bell! After averaging over $12 billion of inflows a month in 2019, US-listed fixed income ETFs just hit a record yearly flow total. And we still have two more months left to go!

Over $128 billion has gone into bond ETFs in 2019, outpacing the previous record of $127.1 billion in 2017.

From a market’s perspective, the flows have been fueled by two major trends:

  • Downside risk mitigation: With geopolitical risk whipsawing sentiment all year, interest rate-sensitive sectors (e.g., Gov’t/Agg/MBS) have taken in 60% of the flows.
  • Yield at any price: With a dearth of negative-yielding debt and accommodative global central bankers pushing investors further out on the risk curve, high yield ETFs have posted their best year ever in terms of flows (+16 billion) – even though spreads are 30% below long-term averages and the bonds are trading at their most negatively convex level ever.1

Drivers behind this record flow haul include liquidity needs and demographics, in addition to investors having more choices (e.g., active) and ETFs continuing to show their mettle during times of stress.

With these inflows, assets are now firmly over $800 billion. If the next two months keep the average flow gathering pace of 2019 going, US-listed bond ETF assets could surpass $850 billion by year’s end – with a realistic shot at surpassing the one trillion mark in 2020.

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Source: Bloomberg Finance L.P. as of 10/29/2019.

What It All Means and What’s Next

Diversification is the only free lunch, and the double-digit drawdowns from 2018 are still fresh in investors’ minds. So it’s not that big of a surprise to see investors continuing to build up portfolio ballast in a year when the 20% global equity market gains year to date2 are juxtaposed against global economic policy uncertainty sitting at all-time highs.3

With the outlook for the rest of 2019 looking similar to the first three quarters of the year (slowing economic growth, falling corporate profits, trade uncertainty, Brexit, and low rates) having a diversified mix of assets may be beneficial. After all, the standard 60/40 portfolio is up double digits in 2019 and having its second best yearly performance over the past 10 years.4


Bloomberg Finance L.P., as of 10/29/2019.

Bloomberg Finance L.P., as of 10/29/2019, based on the MSCI ACWI IMI Index.

Bloomberg Finance L.P., as of 10/29/2019, based on the Global Economic Policy Uncertainty Index.

Bloomberg Finance L.P., as of 10/29/2019, based on a 60% MSCI ACWI IMI Index/40% Bloomberg Barclays US Aggregate Bond Index mix rebalanced annually. In 2019, the 60/40 mix is up 14.4%. Past performance is not a guarantee of future results.


Bonds generally present less short-term risk and volatility than stocks, but contain interest rate risk (as interest rates raise, bond prices usually fall); issuer default risk; issuer credit risk; liquidity risk; and inflation risk. These effects are usually pronounced for longer-term securities. Any fixed income security sold or redeemed prior to maturity may be subject to a substantial gain or loss.

International Government bonds and corporate bonds generally have more moderate short-term price fluctuations than stocks, but provide lower potential long-term returns.

Investing in high yield fixed income securities, otherwise known as "junk bonds", is considered speculative and involves greater risk of loss of principal and interest than investing in investment grade fixed income securities. These Lower-quality debt securities involve greater risk of default or price changes due to potential changes in the credit quality of the issuer.

Diversification does not ensure a profit or guarantee against loss.

Bond funds contain interest rate risk (as interest rates rise bond prices usually fall). There are additional risks for funds that invest in mortgage-backed and asset-backed securities, including the risk of issuer default, credit risk and inflation risk. Funds that invest in lower-quality debt securities generally offer higher yields, but also carry more risk. The municipal market is volatile and can be significantly affected by adverse tax, legislative or political changes and the financial condition of the issuers of municipal securities. Interest rate increases can cause the price of a debt security to decrease. A portion of the dividends you receive may be subject to federal, state or local income tax or may be subject to the federal alternative minimum tax.