Investors are looking for a safe haven: Billions of dollars poured into ultra-short-term bond ETFs

As expectations of a Fed rate hike in March grew stronger, traders began shifting money to ETFs focused on ultra-short-term bonds, while selling those that tracked longer-term bonds. The former, they argue, is relatively less susceptible to interest rate risk.

According to media data, the $14 billion PIMCO Enhanced Short Maturity Active ETF (NYSE:MINT) recorded the largest inflow since 2009, with nearly $900 million flowing into the ETF.

In addition, the SPDR Bloomberg 1-3 Month T-Bill ETF and the iShares Short Treasury Bond ETF (NASDAQ:SHV), which focus on investing in ultra-short-term bonds, both reported their largest weekly inflows since 2020.

Meanwhile, the $13 billion Vanguard Short-Term Treasury Index Fund ETF Shares (NASDAQ: VGSH) and the Charles Schwab U.S. Short-Term Bond ETF (SCHO), which primarily tracks bonds under three years, both recorded their largest weekly outflows since 2019.

"People are looking for good places to store capital." Peter Chatwell, head of multi-asset strategy at Mizuho International, commented, "This flow of funds suggests that fed rate hikes and quantitative easing will allow liquidity to flow from 'duration risk' assets to ultra-short-term assets." ”

As of writing, the U.S. 10-year Treasury yield fell 0.65 percent to 1.943 percent.