April 27, 2018

For the Week Investors Embrace Fixed Income Funds Despite Rising Yields

by Tom Roseen.

Investors continued to pad the coffers of bond funds for Thomson Reuters Lipper’s fund-flows week ended Wednesday, April 25, 2018, despite witnessing the U.S. ten-year Treasury yield closing above 3% for the first time since December 27, 2013. For the week taxable bond funds (including ETFs) took in $921 million, for their seventh consecutive week of net inflows. Investors injected net new money into corporate investment-grade debt funds (+$2.0 billion), government-Treasury funds (+$1.1 billion), and international & global debt funds (+$0.8 billion). Meanwhile, they turned their backs on high-yield funds, redeeming $2.5 billion net for the week.

With inflation fears driving up yields, it isn’t too surprising to see that Lipper’s Inflation-Protected Bond Funds (+$112 million) and Loan Participation Funds (+$264 million) classifications have attracted net new money for the third and tenth consecutive weeks, respectively. Year to date, the Inflation-Protected Bond Funds classification has attracted some $5.3 billion net, while Loan Participation Funds has taken in $6.4 billion net.

Interestingly and despite the one interest rate bump so far this year by the Federal Reserve and the recent rising ten-year Treasury yield, investors have injected almost as much into taxable bond funds (+$69.1 billion) as into equity funds (+$70.8 billion). Corporate investment-grade debt funds (+$54.6 billion) and international equity funds (+$81.5 billion) have attracted the lion’s share of the net inflows into the two groups. On the flip side we have seen investors giving a cold shoulder to high-yield bond funds (-$18.9 billion) and balanced funds (-$5.1 billion), while equity income funds (-$9.9 billion) and large-cap funds (-$5.8 billion) have been the equity pariahs for the year thus far.

Thomson Reuters Lipper delivers data on more than 265,000 collective investments in 61 countries. Find out more.

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