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Bonds Beat Stocks in Canada With $2.8 Billion in July ETF Flows

Bonds are back in vogue for buyers of Canadian exchange-traded funds.

After months of lagging behind their equity counterparts, fixed-income ETFs attracted net capital of C$3.7 billion ($2.8 billion) in July, their highest month of inflows this year, according to data from National Bank of Canada. That made up more than half of the C$6.2 billion received last month by ETFs, which was the most since February.

It was the first month this year that fixed-income ETFs outsold equity funds.

Bonds Are Back

Investors pile more capital into fixed income ETFs than equities in July

About 43%, or C$1.6 billion, of bond ETF inflows went to one fund — NBI Unconstrained Fixed Income ETF — thanks to one large institutional-size block subscription toward the end of July, Daniel Straus, vice president of ETFs and financial products research at National Bank, said in a report.

This actively-managed fund consists mainly of global bonds, with Australian, Indonesian, Russian and Italian government bonds among its top holdings as of June 30. About 25% of the portfolio was investment-grade corporate debt and 14% is high-yield corporate.

Canada aggregate bond ETFs like BMO Aggregate Bond Index ETF and TD Canada Aggregate Bond Index and the popular cash ETFs made up most of the remaining fixed-income new sales.

Still, risk appetite in stocks has remained strong over the past three months as equity ETFs saw an influx of C$2.2 billion in July, with technology and materials funds welcoming the highest inflows, Straus said. The materials group includes some ETFs with gold-mining stocks.

Commodities funds attracted C$119 million in capital last month, with single long gold ETFs accounting for 90% of those inflows.

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