Biggest Credit ETF Bleeds $3.6 Billion in Worst-Ever Month

After a blowout 2020 for corporate debt, exchange-traded fund investors are quickly souring on those bonds.

The world’s largest credit ETF notched its worst month of outflows since it began trading about two decades ago. Traders pulled roughly $3.6 billion from the iShares iBoxx $ Investment Grade Corporate Bond ETF (ticker LQD) in March, according to data compiled by Bloomberg. That exodus came as the $42 billion fund suffered its biggest quarterly rout in 12 years.

High-grade corporate bonds have come under pressure as the U.S. vaccine rollout picked up pace, brightening the economic outlook. Meanwhile, President Joe Biden’s stimulus measures have boosted expectations for inflation, fueling concern over the value of future fixed-income returns. That’s sparked a vicious selloff in longer-dated Treasuries and hammered funds such as LQD, which has a relatively high duration -- or sensitivity to interest-rate changes -- of 10 years.

“It’s probably part and parcel with Treasury rates moving higher,” said Sameer Samana, Wells Fargo Investment Institute’s senior global market strategist. “We still like credit due to the higher income, but a lot less than we did last year, when spreads were wider.”