By John Geddie
LONDON, March 12 (Reuters) - European-listed junk bond exchange-traded products (ETPs) recorded their biggest monthly inflows in February, data from BlackRock showed, while cash was pulled out of German government and money market ETPs.
Fixed income ETPs represent a fraction of the 105 trillion dollar global bond market, but the data, which covers only funds listed in Europe, provides evidence of an investor hunt for yield against a backdrop of ultra-loose monetary policy and record low interest rates.
ETPs encompass any portfolio of securities that trade intra-day on an exchange, and include exchange traded funds (ETFs), exchange traded notes (ETNs), exchange traded commodities (ETCs) and exchange traded instruments (ETIs).
Junk bond ETPs gained 1.3 billion euros in February, adding nearly 20 percent to their total assets under management. It was the biggest jump since BlackRock began tracking the ETP industry in 2008.
Other higher-yielding funds also saw strong inflows. Emerging market ETPs gained 800 million euros, the most in nine months, while 1.3 billion euros came into investment grade corporate funds.
Ahead of the European Central Bank’s sovereign bond-buying programme which started this month, there were modest inflows of 477 million euros into ETPs covering euro zone government debt.
But on a country-by-country basis, money came out of top-rated German funds and flowed into the indebted Italy and Spain.
Approximately 207 million euros came out of German government ETPs in February, while 122 million euros went into Italy and 95 million euros into Spain.
All German bonds out to seven years maturity now yield below zero, meaning investors are effectively paying to lend to governments. Italian five-year government bonds yield around 0.4 percent.
Money market ETPs, which have seen significant annual outflows in recent years, lost another 306 million euros.
While ETPs are well established in equity markets, they are relatively in fixed income new product and make up only around 0.4 percent of global outstanding bonds.
At the end of February, BlackRock tracked 5,462 exchange-traded products globally. (Editing by Catherine Evans)