Mortgage Rates Near 49-Year Low Put ETF on Track for Record Exit

(Bloomberg) -- As investors rush to the safety of Treasuries and mortgage rates remain near an almost five-decade low, a $23 billion exchange-traded fund is on track for its biggest-ever exodus.

BlackRock Inc.’s iShares MBS ETF, ticker MBB, has seen outflows of $604 million so far in March, according to data compiled by Bloomberg. The withdrawals are already the largest since the fund started trading in 2007. Just in the last two days, almost $384 million has exited the product.

Mortgage rates rose slightly from their all-time low last week, but are still very close to the bottom as concern over the impacts of the coronavirus pandemic triggered a seemingly endless demand for U.S. government bonds. While agency mortgages are seen as a sweet spot by ETF investors willing to take on just a little bit more risk than offered by Treasuries, the race to haven assets has spurred an exodus from those funds.

“Investors have sought the safety of U.S. Treasuries in a flight to ultimate quality,” said Todd Rosenbluth, CFRA Research’s New York-based director of ETF research. “Demand for anything riskier has taken a back seat.”

State Street Corp.’s $2 billion SPDR Portfolio Mortgage Backed Bond ETF, ticker SPMB, lost $106 million in the latest session for which Bloomberg has data -- its biggest single-day outflow on record.

MBB’s net indicated yield of 2.6% surpasses the 1.7% for the iShares 1-3 Year Treasury Bond ETF -- which tracks U.S. Treasury bonds maturing in one to three years. In comparison, the $21 billion Treasury ETF, also known as SHY, has taken in $2.4 billion this week.

--With assistance from Claire Boston.

To contact the reporter on this story: Claire Ballentine in New York at cballentine@bloomberg.net

To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, Rita Nazareth, Brendan Walsh

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