The first three quarters of 2023 were challenging for investors in treasury bond ETFs as the US Federal Reserve’s rate hikes impacted returns, although the last quarter offered significant relief. Despite the negative returns through the first three quarters of 2023, treasury bond ETFs had consistently strong inflows throughout the year. This investor interest was across the duration spectrum; longer duration (10+ years) treasury bond ETFs took in $42 billion in net inflows in 2023 compared to $26 billion for ultra-short duration (less than one year) treasury ETFs, despite the former being more sensitive to rate hikes.
This apparent contradiction between weak returns and strong flows in Treasury bond ETFs last year is best highlighted by the iShares 20+ year Treasury Bond ETF (TLT). It took in $17 billion in net flows in the first three…
