The Federal Reserve’s recent policy decision kept interest rates unchanged, continuing since July 2023. However, it announced a significant reduction in its quantitative tightening (QT) program, starting in June. QT involves selling off assets to decrease money supply and raise interest rates. This move follows massive bond purchases during the pandemic, which suppressed interest rates. While QT can help control inflation, it also reduces liquidity in the economy and can lead to higher interest rates and tighter monetary conditions. The Fed aims to avoid a repeat of the 2019 “repo crisis” caused by QT, and plans to scale back QT to $25 billion, more than half of its current rate.

In recent weeks, several bond exchange-traded funds (ETFs) have experienced a significant surge in inflows, indicating a heightened interest among investors. This shift coincided with a market that significantly upped bets on Federal Reserve rate cuts for 2024, backed by a robust and ongoing disinflationary trend in the U.S. economy. Speculators have gone as far as factoring in an initial rate cut as early as March 2024, with whispers of a total of five rate cuts by December 2024. But which bond ETFs are currently piquing investors’ interest? From ‘Cash-Like’ to ‘Equity-Like’ While the third quarter in 2023 witnessed a notable uptick in inflows into cash-linked bond ETFs, pr

October jobs report numbers missed expectations Friday, and came in at nearly half of September's reported figures. Non-farm payrolls increased by 150,000 jobs in October, registering a steep decline from September's 297,000 jobs. The figure fell short of market forecasts, which stood at 180,000. One key reason for the deceleration is likely the United Auto Workers strikes, which resulted in a net loss of jobs for the manufacturing sector. Market Reaction To The US Jobs Report Treasury yields tumbled across the board. The yield on the two-year Treasury fell to 4.87%, a decrease of more than 10 basis points, while the 10-year Treasury yields fell by 11 basis points to 4.56%. The ben

We performed a screening of mid-cap ETFs, defined as having Assets Under Management (AUM) between $2 and $10 billion - to determine what funds had the largest positive and negative returns on the week, according to data from etfdb.com. Only non-leveraged funds were considered. Winners Vanguard Long-Term Treasury ETF (NYSE:VGLT) VGLT added $226.42 million in net assets over the trailing week. The Vanguard Long-Term Treasury ETF offers exposure to long-term government bonds, focusing on Treasuries that mature in ten years or more. VGLT has $6.97 billion in AUM and an expense ratio of 0.04%.  VGLT has added $4.01 billion in net assets YTD. iShares Silver Trust (NYSE:SLV) SLV gained $202

The Federal Reserve’s commitment to maintaining higher interest rates for longer has unleashed seismic tremors within the bond market, culminating in an explosive surge in yields across all maturity periods. Initially, the reverberations were absorbed by 2-year yields, a segment that had historically been swift to react to policy cues from Powell and the Fed. But as investors adjust their interest rate projections, the intense surge in Treasury yields is now extending its reach to longer-term maturities. At the latest FOMC meeting, the Fed left the rate unchanged in the 5.25%-5.50% range, but macroeconomic projections indicated a median preference for another rate hike in 2023, and tr

We performed a screening of medium-cap ETFs - defined as having Assets Under Management (AUM) between $2 billion and $10 billion - to determine what funds had the largest change in net assets on the week, according to data from etfdb.com. Only non-leveraged funds were considered. Winners iShares Treasury Floating Rate Bond ETF (NYSE:TFLO) TFLO added $2.13 billion in net assets over the trailing week. The iShares Treasury Floating Rate Bond ETF offers exposure to U.S. floating rate Treasury bonds, whose interest payments adjust to reflect changes in interest rates. TFLO has $8.39 billion in AUM and an expense ratio of 0.15%. TFLO has added $4.02 billion in net assets YTD. Vanguard Long-Term T

On Wednesday, the Federal Reserve is expected to raise interest rates by half of a percentage point and announce the start of reductions to its $9 trillion balance sheet as U.S. central bankers work to combat high inflation. The decision would lift the Fed's short-term target policy rate to 0.75% - 1% and set a plan to trim its Treasuries and mortgage-backed securities portfolio by as much as $95 billion a month, writes Reuters. Markets have priced in further rate increases through this year and into next. "Powell will continue to have a strong incentive to sound hawkish," Piper Sandler economist Roberto Perli said this week. "The Fed's focus these days is 100% on bringing inflation dow

Japanese institutional managers are fueling the bond selloff just as the Federal Reserve pares its $9 trillion balance sheet, writes Bloomberg. The latest data from BMO Capital Markets show that the largest overseas holder of Treasuries has offloaded almost $60 billion over the past three months.  Bloomberg says that though it may be a small change relative to Japan's $1.3 trillion stockpile, the divestment threatens to grow.  The monetary path between the U.S. and Japan is diverging evermore, the yen is at 20-year lows, and market volatility stateside is breaking out.  "It's a significant amount of selling and on par with what we saw in early 2017 from Japan," said Ben Jeffery, BMO's

According to a new report, global sovereign debt is expected to climb to a whopping $71.6 trillion in 2022, while fresh borrowing is also anticipated to remain high, writes CNBC. In its second annual Sovereign Debt Index, British asset manager Janus Henderson projected a 9.5% rise in global government debt, driven primarily by the U.S., Japan, and China. According to the report, global government debt jumped 7.8% in 2021 to $65.4 trillion, while debt servicing costs dropped to $1.01 trillion, an effective interest rate of just 1.6%. However, debt servicing costs are set to rise significantly in 2022, climbing around 14.5% on a constant-currency basis to $1.16 trillion. “The pandemic has h