ETF Yield Seeking
Michael Cafiero – Vice President ETF Trading – Knight Capital Americas, L.P.
Investors continue to seek a maximum total return as we continue to see the market cooperate. Currently, the Dow remains in the upper half of the 21- Day 3.5% Exponential Band signaling continued strength in this market.
Knight ETF Trading:
Flows: Last week Knight led all ETF Securities Brokers with an advertised trade volume of 15.88% while trading in 1320 unique ETFs. (Autex Block Data 2-21-12)
US Equity ETFs: Flows continue to favor an imbalance to the buy side highlighted by inflows of SPY(SPDR S&P 500 ETF Trust), VOO (Vanguard S&P 500 ETF), QQQ(Powershares QQQ Nasdaq 100), IWM (iShares Russell 2000), and IWS (iShares Russell Midcap Value).
Fixed Income ETFs: Fixed Income volume continues to remain very high. The High Yield trade continues with major inflows into JNK (SPDR Barclays Capital HY), HYG (iShares IBoxx H/Y Corp,) and PHB (Powershares Fndmtl H/Y Corp). The same is echoed in investment grade offerings of LQD (iShares iBoxx Inv Gr Corp Bd), VCIT(Vanguard Intermediate Term Corp), VCLT (Vanguard Long – Term Corp Bond), and VCSH (Vanguard S/T Corp Bond ETF). Naturally because of such an increase in concentration to corporates, the Aggregate Bond and Treasury Funds continue to see flows pour out of BND (Vanguard Total Bond Market) and SHY (iShares Barclays 1-3 Year TR). Emerging market Bond exposure is in demand with inflows into EMB (iShares JP Morgan EM Bond Fund) and EBND (SPDR Barclays Capital Emerging).
International ETFs: Strong inflows into emerging markets headlined by VWO (Vanguard MSCI Emerging Market) being heavily favored by the buy side. Regional international exposure saw inflows into VEU (Vanguard FTSE All World EX-US) and SCZ (iShares MSCI EAFE Small Cap). Single country inflows included flows into EWG (iShares MSCI Germany Index), EWA (iShares MSCI Australia Index), GXC ( SPDR S&P China ETF), EWM (iShares MSCI Malaysia) and ECH (iShares MSCI Chile Investable). Outflows for single countries included FXI (iShares FTSE China 25 Index), RSX (Market Vectors Russia ETF) and EWW (iShares MSCI Mexico).
Currency and Commodity ETFs/ETNs: A positive outlook on the Euro saw an increase in buy side flows into FXE (Currency shares Euro Trust). For commodities, we have seen mixed flows into GLD (SPDR Gold Trust) which has been the case for the last two weeks. Apparently there is a demand for Oil and Natural Gas exposure with inflows seen going into USO (United States Oil Fund) and UNG (US Natural Gas Fund LP). Demand for broad commodity exposure also was on the rise with flows leading into DBC (Powershares DB Commodity Index).
Sector ETFs: For sector rotations we are seeing outflows of XLV (Health Care Select Sector), XLE (Energy Select Sector), and XLU (Utilities Select Sector SPDR). Flows have moved into XLF (Financial Select Sector), XLB (Materials Select Sector SPDR), IXN (iShares S&P Glbl Tech Sector), IYW (iShares DJ US Technology Sector) and KRE (SPDR S&P Regional Banking).
Alternative/Specialty ETFs: SPLV (Powerhsares S&P 500 Low Volatility) continues to increase in two sided flows week over week. Preferred exposure has been favored in the last two weeks with inflows heading into PFF (iShares S&P Pref Stock Index). Yield oriented ETFs continued to be in favor with strong inflows heading towards, SDY (SPDR S&P Dividend ETF), HDV (iShares High Dividend EQ FD), and VYM (Vanguard High DVD Yield ETF). Not strong but an overall a positive buy side imbalance for volatility seen in VXX (iPath S&P 500 Vix S/T FU ETN) and TVIX (Velocityshares 2X Vix SH-TRM). Rounding out real estate flows VNQ (Vanguard REIT ETF) has seen its share of buy side flows.
You may reach Michael directly at mcafiero@knight.com
This communication has been prepared by the trading, market making and/or the sales personnel (“Trader”) of Knight Capital Americas, L.P. (“KCA”), a subsidiary of Knight Capital Group, Inc. (“Knight”). The information contained herein may be the personal perspective of the Knight Trader and/or commentary compiled from public sources. The information from public sources is believed to be reliable but Knight does not guarantee or represent its accuracy or completeness. The opinions and views expressed by the individual trader do not represent the opinions and views of Knight, its affiliates, officers or other personnel. No responsibility and no express or limited liability is assumed jointly or individually for any losses or damages arising out of errors, omissions, delays in the receipt of the information, or any actions taken in reliance upon the information. The information contained herein does not provide investment advice and is not a sufficient basis for an investment decision. No information contained herein should be construed as a solicitation or an offer to buy or sell any security or product. Indications of interest, opinions or views expressed by the trader are not firm orders or quotes and may not be current. No responsibility is assumed to maintain and/or update the information. KCA most likely makes a market in the securities mentioned in this document and its personnel, including those involved in the preparation or issuance of the material may take a position or action which may be inconsistent with the opinions and views expressed therein. Questions regarding the information presented herein or a request for a copy of this document should be referred to your Knight Representative.
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