The iShares iBoxx $ Investment Grade Corporate Bond ETF aka LQD, the largest ETF that tracks US corporate investment-grade bonds had its biggest one-day net outflows of $1.49bn in a single session. This is the largest outflow since April 1, 2021 where outflow was $1.7bn. The outflows come on the back of inflation fears and concerns that higher rates will be a headwind for long-duration assets. As per Bloomberg, the outflow reduced the fund’s assets by 3.9% to $36.8bn, the lowest level in at least a year. A record $14.9bn flooded into LQD after the Fed stepped in to support corporate credit markets at the height of the pandemic in 2020. As reported by Bloomberg, rising inflation pressures and threat of higher yields have eroded the appeal of blue-chip bonds. Investors have withdrawn more than $16bn from LQD so far in 2021, the most of any US ETF. Peter Tchir, head of macro strategy at Academy Securities commented that “LQD is a yield product and would suffer…so the flows make sense to me”.
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