Sharp Decline for Long-Term Bonds After Fed Rate Hike
ETF data story for the week of July 24 to 28, 2023
On the heels of the Fed’s anticipated quarter point rate hike, long-term investment grade bond prices suffered from the jump in Treasury yields, with investors reflecting on the future of interest rates following a stronger-than-anticipated GDP report. The 10-year Treasury yield gained 12 bps to 3.96% from 3.84% while the yield on the 2-year Treasury rose 4 basis points, to 4.89% from 4.85%, bringing the 10-2 year yield spread to -0.93%.
And yet, despite these initially discouraging conditions, it’s essential that investors don’t overlook the positive signs hidden beneath surface-level data trends. Indeed, long term fixed income ETFs continue to see positive capital flows.
Interestingly though - and perhaps indicative of marketplace resilience amid uncertainty - is how some investors currently view existing interest rate levels amidst declining long-term bond values in a constructive rather than negative light. In this respect, the current climate is perceived as presenting new opportunities to enter select markets with growth potential.
While the ETF Segment ‘Government IG Long Term’ suffered a loss of 1.20% over the week, bringing its YTD performance to +0.29%, inflows of $13 million inflows were recorded over the same period. As an example, the iShares Core Canadian Long Term Bond Index ETF lost 0.83% for the week but saw inflows of more than $30 million.
Group Data
Funds Specific Data: XLB, PGL, XTLH
Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.
