Investors of exchange-traded funds that buy U.S. government debt are signaling their conviction the Federal Reserve is intent on raising interest rates sooner rather than later.
After pouring into the ETFs to start the year, investors pulled $10.3 billion in March, the biggest exodus since December 2010, data compiled by Bloomberg show. The $7.86 billion iShares 1-3 Year Treasury Bond ETF alone lost a third of its assets from withdrawals, the most of any fixed-income fund this month.
The retreat shows how quickly ETF investors recalibrated expectations as Fed Chair Janet Yellen said March 19 that a strengthening U.S. economy may prompt the central bank to lift its benchmark rate six months after it stops buying bonds. While Treasuries have confounded forecasters by outperforming this year, ETF investors are shifting money into riskier assets such as junk loans and small-cap stocks to capture greater returns.