Biggest Withdrawals
The three ETFs that suffered the biggest withdrawals in March were all U.S. government debt funds, with BlackRock Inc.’s iShares 1-3 Year Treasury Bond ETF losing $3.9 billion, data compiled by Bloomberg show. The outflows accelerated after Yellen’s comments this month, strengthening the view that policy makers sees enough signs of growth in the U.S. economy to end its bond purchases this year and raise rates soon after.
After inundating the world’s largest economy with more than $3 trillion with three rounds of quantitative easing since 2008, economists predict the Fed will stop buying bonds by December.
The central bank has curtailed its monthly purchases by $10 billion at each of its three policy meetings this year.
Traders anticipate a 64 percent chance the Fed will start increasing its benchmark rate, which has been close to zero for six years, in June 2015, based on futures trading on the CME Group Inc.’s exchange. Prior to Yellen’s comments, the likelihood was 42 percent.
Recent reports on the U.S. economy have bolstered the central bank’s case. Confidence among consumers rose this month to the highest since 2008, exceeding all forecasts in a Bloomberg survey, as more Americans grew optimistic about the outlook for economy, according to a Conference Board index.
Employment Picture
Household spending increased by the most in three months in February as employers added more workers than economists projected. Disposable income, or the money left over after taxes, rose by the most since September.
Yellen meanwhile said in a news conference after the central bank’s March meeting that “virtually all” measures of unemployment she studies are showing improvement.
The Fed’s intent should tell investors to “get out of the way,” according to William Larkin, a money manager who helps oversees $520 million at Salem, Massachusetts-based Cabot Money Management. Larkin said his firm has been selling Treasuries.