* ETF bond funds enjoyed record quarter, attracting $44.5
* EM funds lead, followed by investment-grade credit, TIPs
* Investors expected to favour U.S. over Europe in Q2
LONDON, April 25 Exchange-traded bond funds
(ETFs) enjoyed record quarterly inflows in the first three
months of 2017, attracting $44.5 billion, iShares, BlackRock's
index-tracking fund group, said on Tuesday.
The tally surpasses the previous record of $42.5 billion set
in the first quarter of 2016, according to iShares, which by
itself captured $20.3 billion of that money.
Emerging market debt led the rise, with $15.6 billion of
inflows, as demand recovered from the U.S. election win of
A total of $14.4 billion went into investment-grade credit
and $3.6 billion into inflation-linked U.S. Treasury bond funds
following a spell of positive global economic data.
Despite weathering several shocks since the 2008-9 financial
crisis, the jury is still out on how ETF funds - which trade as
shares and aim to replicate the price of a basket of bonds or
other assets - will react if a similar crisis hits.
Concern remains about the ability to buy and - probably more
important - sell assets like high-yield corporate debt or that
issued in emerging markets, which can become highly illiquid in
a major selloff.
In the second quarter, investors are expected to favour U.S.
over European-focused ETFs.
"We expect the trend towards U.S. investment-grade credit to
continue into the second quarter, driven by yield differentials
between the regions," said Stephen Cohen, head of fixed income
beta at BlackRock.
Options activity on bond ETFs is also expected to continue
to expand, Cohen said. "While more developed in the U.S. we are
seeing strengthening demand in Europe."
(Reporting by Marc Jones, editing by Larry King)