Flows into Europe-listed bond ETFs hit by hawkish central banks, reports Lyxor

Aug 16th, 2017 | By | Category: ETF and Index News

European-listed ETF market flows remained steady in July with net new assets (NNA) over the month totalling €8.7 billion, according to monthly flows analysis from Lyxor. However, fixed income flows decreased to €2.3bn, close to the lowest monthly level of the year.

Bond ETF flows hit by hawkish central banks, reports Lyxor

Marlene Hassine Konqui, head of ETF research, Lyxor.

Marlène Hassine Konqui, head of ETF research at Lyxor, commented: “Both developed and emerging markets govies were negatively impacted by the more hawkish environment in the US and in Europe and the threat of rising rates. Developed govies saw €427 million of outflows while emerging market debt inflows decreased €612m after a year of monthly inflows close to €1bn.

“On the positive side, both corporate bond and money market ETFs kept seeing inflows of €1bn and €731m respectively, mainly dedicated to floating rate note and short-term ETFs in a rising rate environment. Normalisation expectations increased inflation-linked ETF flows with €334m NNA.”

In the equity space, flows into European-listed ETFs during July reached €5.5bn. Equity ETFs with exposure to Europe made up roughly two-thirds of these NNA with €3.4bn during the month, the second highest month of inflows seen year-to-date, as the region continued to display signs of economic growth.

“European-listed ETFs focusing on US equity continued to recover reaching €774m, helped by the weakening dollar and a strong earnings season, in particular in the tech sector,” added Konqui. “Flows into Asia Pacific equity ETFs listed in Europe slowed down to €301m as PM Abe and Japan’s Abenomics was challenged. Global equity ETF inflows continued to decelerate, to €253m, as global monetary normalisation took centre stage and unsettled markets.”

Monetary policy normalisation also negatively impacted emerging market equity ETF flows which were reduced to €306m – their lowest level in six months. Once again, these flows were almost exclusively focused on broad-based ETFs rather than single countries.

European-listed smart beta ETF inflows totalled €253m, in line with their one-year average. Flows were mainly focused on factor allocation strategies, namely multifactor and value ETFs.

Commodity ETFs listed in Europe saw €748m of inflows during July, the highest inflows for one year. The vast majority of these were made up by flows into gold and precious metals ETFs.

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