The timing of the first U.S. interest rates hike in almost a decade has been unsettling the financial world for long. In all FOMC meetings so far this year, the Fed has kept its rates unchanged and hinted toward a slower rate hike path when it is warranted.

The September Fed meeting was also no different suggesting cheap money flows for longer than expected as China and global slowdown concerns are weighing on domestic growth. The dismal job report for September and the latest Fed minutes confirmed this trend, further dampening the prospect of an interest rates hike for later this year or early next year (read: Guide to Interest Rate Hikes and ETFs: 4 Ways to Play).

This has rekindled investor’s interest in the bond space, as lower rates will push the yields down boosting the prices for the bonds. Added to the popularity was global stock market instability, which wiped out nearly $11 trillion from the global markets in Q3. Last week, the International Monetary Fund (IMF) cut its global growth forecasts for the second time this year and warned of a rising risk of global recession. The agency now projects global economy to grow by 3.1% for this year and 3.6% for the next as compared to the previous forecasts of 3.3% and 3.8%, respectively.

All these factors compelled investors to flock to the bond funds. As a result, the U.S. fixed income ETFs were winners last week (ending October 8), gathering nearly $6 billion in total assets, as per ETF.com. Below, we have highlighted the five bond ETFs that have seen highest inflows in the initial days of the fourth quarter:

SPDR Barclays Capital High Yield Bond ETF (JNK - ETF report)

This product accumulated about $1.8 billion in its asset base in the first few trading sessions of October, propelling its AUM to $10.8 billion. It offers exposure to the high yield corner of the bond ETF world and follows the Barclays High Yield Very Liquid Index. The fund holds 783 low-rated (BB and lower) corporate bonds with average maturity of 6.12 years and modified adjusted duration of 4.32 years.

Expense ratio came in at 0.40% while volume is robust as the fund exchanges more than 8.8 million shares a day. The ETF gained 2.1% so far this month and has a Zacks ETF Rank of 4 or ‘Sell’ rating with a High risk outlook (read: Junk Bond ETFs: A Trouble Zone).

iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD - ETF report)

This fund targets the corporate bond world by tracking the Markit iBoxx USD Liquid Investment Grade Index and holds 1,462 securities in the basket. It pulled in nearly $9388 million in capital to start October, propelling the total asset base to $23.1 billion. It focuses on high quality bonds (BBB and plus) with about 66% going to the mid-term bonds and 34% to the long-duration bonds.

As a result, it has a relatively higher default risk and interest rate risk, with average maturity of 12.25 years and effective duration of 8.02 years. Expense ratio came in at 0.15%. The product was up 0.2% in the same time frame and has a Zacks ETF Rank of 3 or ‘Hold’ rating with a High risk outlook.
 

iShares 7-10 Year Treasury Bond ETF (IEF - ETF report)

This fund provides targeted exposure to mid-term securities and tracks the Barclays U.S. 7-10 Year Treasury Bond Index. Holding a small basket of 22 securities, it focuses on top-rated bonds, suggesting a lower default risk. The fund has an average maturity of 8.51 years and effective duration of 7.64 years (read: Q3 ETF Asset Flow Roundup).

IEF is by far the largest and popular ETF in the bond space with AUM of around $9.7 billion and average daily volume of about 1.7 million shares. It has gathered nearly $841 million in October so far. Additionally, the ETF charges a lower fee of just 15 bps per year. It is down 0.4% and has a Zacks ETF Rank of 3 with a High risk outlook.

iShares iBoxx $ High Yield Corporate Bond ETF (HYG - ETF report)

This is the largest and most liquid fund in in the high yield bond space with AUM of over $13.5 billion and average daily volume of around 7.3 million. The product has accumulated about $687 million in assets in the past few trading sessions while charging 50 bps in fees per year from investors.

The fund tracks the iBoxx $ Liquid High Yield Index and holds 1014 securities in the basket. Effective duration and average maturity came in at 4.20 and 5.11 years, respectively. In terms of credit quality, the fund focuses on lower quality non-investment grade bonds, allocating about 49% of the portfolio to bonds rated ‘B’ or lower. The ETF is up 2.8% and has a Zacks ETF Rank of 4 with a High risk outlook (see: all the High Yield Bond ETFs here).

SPDR Barclays 1-3 Month T-Bill ETF (BIL - ETF report)

This product saw substantial inflows of over $315 million in the same period. It offers exposure to the short end of the yield curve by tacking the Barclays 1-3 Month U.S. Treasury Bill Index. It holds 10 securities in the basket with average maturity and effective duration of 0.15 year each.

The fund has amassed $3.4 billion in its total asset base while it trades in solid volume of 1.1 million shares. It charges 14 bps in annual fees and has delivered flat returns so far in the fourth quarter. BIL has a Zacks ETF Rank of 3 with a Low risk outlook.

Bottom Line

These bond ETFs are getting a lot of attention from investors since the start of the final quarter of 2015. The trend is likely to continue as long as interest rates are at low levels and global worries weigh on stock returns.