U.S. bond exchange-traded fund (ETF) flows have increased by 60% compared to last year, with investor movement into U.S. treasuries and multi-sector income ETFs.

Steve Laipply, global co-head of iShares fixed-income ETFs at BlackRock, stated, "In the U.S., bond ETF flows are up a shocking 60% relative to last year." Laipply added, "Real yields reflect a growth story led by the AI boom and the anticipated increase in productivity that is tied to it." He also said, "About 90% of recent job creation has been in healthcare, government services, and leisure."

George Bory, chief investment strategist of fixed income at Allspring Global Investments, described real yield as beneficial for bond investors. "As a bond investor, real yield is your very good friend," Bory said. He noted that the breakeven inflation rate has been falling sharply across both the short and long ends of the treasuries curve. The breakeven inflation rate measures the difference between standard treasury yields and treasury-inflation protected securities. Bory added, "The most significant one, at least right now, is about the lack of forward guidance."

Bory stated, "The very front end of the curve is now very steep, as the market is now pricing in multiple rate hikes from the Fed." He noted, "You don't have to move very far out the curve to start to see a very material increase in yields." Bory advised caution, saying, "We need to be a little careful because credit spreads are very tight." He also said, "Modest inflation is a meaningful tailwind to credit worthiness and I think we are in bit of a super-cycle for credit more broadly."

The latest core inflation data from the government reached its highest level since October 2023. These figures aligned with market expectations. Oil prices have returned to their pre-war level, and tankers are moving through the Strait of Hormuz. Chevron indicated that gas prices are likely to remain elevated.