Going into the third week of March, U.S. Bond Funds recorded outflows for the first time since mid-December, with the latest rate hike, the impending re-imposition of a national debt ceiling and concerns the Fed will start shrinking its balance sheet later this year among the factors driving redemptions. If redemptions from U.S. High Yield Bond Funds are factored out, however, this fund group would have posted solid inflows.
Investors extended Asia Pacific Bond Fund’s current outflow streak to eight consecutive weeks and redeemed some $1.3 billion — a four-week high — from Europe Bond Funds during the week ending March 15. But Emerging Markets Bond Funds continued to attract fresh money as did Global Bond Funds.
At the asset class level, Total Return and Bank Loan Funds enjoyed healthy inflows and Mortgage Backed Bond Funds attracted some fresh money despite the U.S. rate hike and the concerns about the Fed’s plans for its balance sheet.
Europe Bond Funds with regional mandates accounted for the bulk of the overall redemptions from this fund group. At the country level investors continue to look outside the Eurozone, with Sweden, Norway and Denmark Bond Funds all attracting fresh money and Switzerland Bond Funds posting consecutive weekly inflows in excess of $100 million for the first time since 2Q15.
In addition to the redemptions from junk bond funds, which owed much to the latest drop in oil prices, flows for U.S. Bond Funds were marked by a rotation from Short Term to Intermediate Term Mixed Funds while Long Term U.S. Government Bond Funds posting their biggest inflow in over a year.
Once again both Hard and Local Currency Emerging Markets Bond Funds attracted fresh money. At the country level, flows into Korea Bond Funds hit a 32-week high. Korea’s average weighting among GEM Bond Funds is, however, at its lowest level since 2Q13 while exposure to Brazil is at a 23-month high.
Balanced Funds, which can invest in both equity and fixed income, saw redemptions surge. But the bulk of the outflows came from just three funds.
Cameron Brandt is Director of Research for EPFR Global, an Informa Financial Intelligence company.
