US government bond ETFs set to receive biggest quarterly inflow in 8 years

US GOVERNMENT bond exchange-traded-funds (ETFs) are set to receive their highest inflow in at least 8 years, in the second quarter of this year, as investors rush to put money in safer bonds amid fears over recession and higher inflation levels.

According to Refinitiv Lipper data, US government bond ETFs have received US$42.4 billion so far this quarter, the highest since at least Sep 2014. They received US$24 billion in the first quarter of this year.

The SPDR Bloomberg 1-3 Month T-Bill ETF, iShares Short Treasury Bond ETF and Wisdom Tree Floating Rate Treasury Fund led inflows so far this quarter, receiving US$7.12 billion, US$4.39 billion and US$3.74 billion, respectively.

Analysts expect central banks' aggressive tightening measures to slowdown the global economies this year, which has deterred investments in riskier assets such as equities and high yield bonds. On the other hand, safer government bonds have gained interest.

Goldman Sachs forecasts a 30 per cent chance of the US economy tipping into recession over the next year - versus 15 per cent earlier - while Morgan Stanley places US recession odds for the next 12 months at around 35 per cent.

The US Federal Reserve earlier this month raised interest rates by 75 basis points, its biggest single rate hike since 1994, and has signalled its commitment to containing price pressures even if it brings about a growth downturn. REUTERS