Interestingly, despite the 10-year Treasury yield closing at 1.71% yesterday - its lowest closing value since November 4, 2016 - authorized participants and ETF investors were net redeemers of taxable bond ETFs at negative $5.7 billion, with the second-largest net redemption occurring in our government-Treasury macro-group at negative $1.6 billion, keep in mind that normally there is an inverse relationship between yield and price. The average government-Treasury ETF posted a 1.69% return for the fund-flows week ended August 7, 2019.

Tom Roseen

Categorized in : Money

If the Dow takes a dive of 30%, guess what? your equity ETF is li... by Tom Roseen

If the Dow takes a dive of 30%, guess what? your equity ETF is likely going to take a dive, too.

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Lower rates aren't good for money market funds, but the flows this week represented a flight to safety, investors were just looking for a good place to hide.

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Despite plus-side equity returns, both fund investors and ETF investors were net redeemers of equity assets, redeeming a net $8.4 billion for the week, shrugging off progress in the U.S.-China trade talks, a nice start to the Q2 earnings season, and general agreement on the U.S. budget and ceiling, investors showed constraint after learning that Iran had seized a British oil tanker in the Strait of Hormuz, increasing geopolitical concerns.

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Both fund and ETF investors padded the coffers of taxable and tax-exempt bond funds, investing net new money in longer-dated issues.

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They were selective, however, padding the coffers of Invesco QQQ Trust Series 1 with plus-$2.6 billion and iShares Core S&P 500 ETF with plus-$1.7 billion, while being net redeemers of SPDR S&P 500 ETF Trust with $1.8 billion of cash withdrawals.

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Interestingly, though, we saw retail investors being net redeemers of equity funds at negative $4.9 billion, while authorized participants were net purchasers of equity ETFs at plus $9.4 billion. So once again it was a tale of two cities.

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So if one removes those from the picture, it was a fairly tame week, with the risk-off trade really being the net flows into money market funds, that said, we did see authorized participants being net redeemers of equity ETFs to the tune of $3.2 billion, which is their third weekly redemption in four, while being net purchasers of fixed income ETFs for the third consecutive week, this week injecting $1.1 billion.

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Outflows for both equities and bonds were influenced by two significant liquidations during the week.

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Despite the S&P 500 setting three record closes during the fund-flows week, investors remained on the equity sidelines after learning about disappointing Q1 revenue growth from stalwart Alphabet, there was a split once again between mom-and-pop investors and authorized participants. Equity mutual funds witnessed outflows of $5.5 billion, while equity ETFs took in $3.7 billion during the fund flows week.

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While investors were keeping a keen eye on the FOMC (Federal Open Market Committee) meeting, which concluded on Wednesday on a more hawkish note than some anticipated, taxable-fixed income mutual funds took in small amounts of net new money - $348 million-plus, with ETF investors ... withdrawing $700 million, interestingly, though, both investors types were net purchasers of municipal bond funds, injecting $877 million into conventional open-end funds and $314 million for ETFs, respectively.

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The Federal Reserve's dovish tone in its March meeting minutes along with tame wage growth numbers and news that the IMF lowered its outlook for global economic growth to 3.3% for 2019 were boons for longer-dated bond securities, investors were betting that neither the Fed nor other central banks were likely to hike rates anytime soon.

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We had strong returns this week, but the mutual fund and [exchange-traded fund] investors weren't buying it, i don't think it's concerning at all but it tells us investors were taking some of that hard-won profit off the table.

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Some people are concerned with global growth, but the Fed does have room as far as the U.S. economy goes.

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Although I am thinking that at least from a funds perspective - excluding ETF (exchange-traded fund) flows - that decision was made a week or two ago, the average equity fund lost 2.42 percent for the flows week.

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I guess investors shrugged off the news about the benchmark 10-year Treasury yield closing above 3 percent for the first time since December 27, 2013, and focused on the economics and strong first-quarter earnings season so far.

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So it wasn't like investors totally ignored the rising rates this... by Tom Roseen

So it wasn't like investors totally ignored the rising rates this week.

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Investors had been down on gold for such a long period of time. by Tom Roseen

Investors had been down on gold for such a long period of time.

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The flight to safety was a bit mixed. by Tom Roseen

The flight to safety was a bit mixed.

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The theme is Brexit, and people are concerned. by Tom Roseen

The theme is Brexit, and people are concerned.

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Investors have been trying to find places to hide. by Tom Roseen

Investors have been trying to find places to hide.

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