New numbers for the U.S. economy could foster more investor evaluation of bonds portfolio durations. The PCE price index rose 0.3% in February, while household spending jumped 0.8% The PCE read was in line with analyst expectations, while the consumer spending numbers signal potential economic strength in the road ahead to potential rate cuts.
Federal Reserve Chair Jerome Powell signaled satisfaction with the findings, noting that the February data was “along the line of what we would like to see.” The PCE price index is one of the Federal Reserve’s preferred inflation gauges to monitor.
Satisfactory inflation data fuels the case for potential interest rate cuts to take place in June or beyond. It also creates an opportunity for traders and investors to evaluate duration lengths for their bond portfolios.
Last month, BondBloxx analysis recommended considering intermediate-term U.S. Treasury bonds. “This sector is less sensitive to the high volatility of long-term rates as well as the reinvestment risk of ultra-short maturities,” BondBloxx noted.
Seven-Year Strength
Looking at BondBloxx’s selection of U.S. Treasury bond ETFs, traders and investors can observe a notable uptick in fund flows for their intermediate-duration offerings. In particular, the BondBloxx Bloomberg Seven Year Target Duration US Treasury ETF (XSVN ) is seeing notable gains.
Within the last month alone, XSVN has seen net flows of over $40 million. Looking back over the last three months, this brings the total flows for the fund to over $67 million. These notable gains have contributed to the fund’s total AUM of roughly $139 million.
The strong flows are not limited to the seven-year duration. The BondBloxx Bloomberg Five Year Target Duration US Treasury ETF (XFIV ) has seen about $35 million in flows over the last three months. Meanwhile, the BondBloxx Bloomberg Ten Year Target Duration US Treasury ETF (XTEN ) has seen flows of more than $64 million over the last three months.
Strong numbers for recent fund flows, particularly for XSVN, could indicate that investors and traders share BondBloxx’s opinion on intermediate-duration U.S. Treasury bonds. Looking ahead to possible rate drops on the horizon, the intermediate duration path could capitalize on current Treasury yields while cementing a position ahead of moderating inflation data.
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