U.S. mortgage-backed securities ETFs recorded $2.4 billion in net outflows in September, while BlackRock’s iShares MBS ETF (NASDAQ:MBB) accounted for roughly $2.67 billion, its largest monthly redemption since its 2007 inception. The outflow exceeded MBB’s previous periods of heavy selling during the Global Financial Crisis and the COVID-19 market shock. MBB, which holds U.S. agency mortgage-backed securities and has nearly $35.5 billion in net assets, fell roughly 3% on a total-return basis during the month. The selling came as the 10-year Treasury yield rose above 5.2% in late September and the average U.S. 30-year mortgage rate reached 7.28% on Oct. 1, making Treasuries more competitive while increasing mortgage bonds’ prepayment and extension risks. However, flows also indicate a shift within mortgage exposure: BlackRock’s model-allocation team sold more than $1 billion of passive MBB in September while its actively managed iShares Mortgage-Backed Securities Active ETF (BATS:MBBA) attracted $561.87 million. The pattern suggests some investors are moving from passive to active management rather than abandoning mortgage credit entirely.