Increased Preference for Safe Assets in the US Stock Market... Influx of Funds into Long-term Bond ETFs

4 Trillion Won Net Inflow into TLT Last Month

10-Year Treasury Yield Also Stabilizing

"Buy in Installments Around 4.5% Annually"

Global funds are flocking to US long-term bond ETFs, which were previously shunned right after Donald Trump was elected President of the United States. This is due to the spread of the theory of peak long-term bond yields and the emphasis on safe asset preference following the shock from China's AI startup DeepSeek.

According to ETF.com, the 'iShares 20+ Year Treasury Bond ETF' (TLT) listed on the US stock market saw a net inflow of $2.7829 billion (approximately 4 trillion won) in January. Although $5.1959 billion flowed out in December last year, marking the largest monthly net outflow of the year, investor sentiment is recovering. The yield also rose by 3.58% compared to the 52-week low recorded on the 14th.

Domestic individual investors are also in a buying mood. Individuals have net purchased 47.6 billion won and 20.8 billion won worth of 'ACE US 30 Year Treasury Active ETF(H)' and 'KODEX US 30 Year Treasury Active ETF(H)' listed on the domestic stock market, respectively, this year.

The reason funds are flowing back into US long-term bond ETFs is due to the perception that the rise in bond yields (fall in bond prices) is excessive despite the possibility of adjusting the pace of interest rate cuts. The Federal Reserve deleted the phrase 'inflation is close to the 2% target' from the Federal Open Market Committee (FOMC) policy statement on the 29th. Although it maintained a hawkish stance by freezing rates, the market evaluated it as more dovish than initially expected.

The shock from DeepSeek also caused the US stock market to fluctuate, increasing demand for safe assets like US long-term bonds. The 10-year US Treasury yield exceeded 4.8% at the beginning of the year but recently fell to the 4.5% range. It is expected that bond demand will increase further as stock market uncertainty is anticipated to grow for the time being.

Experts advised that a strategy of buying in installments is valid given the uncertainty of the impact of President Trump's tariffs, tax cuts, and immigration restrictions on inflation. Min Ji-hee, a researcher at Future Asset Securities, said, "It will take more time to confirm the policy impact that the Fed is wary of, but it seems that the base rate will be cut twice more this year," and "If the 10-year US Treasury yield is around 4.5% annually, I recommend a strategy of buying in installments."

Reporter Maeng Jin-kyu maeng@hankyung.com