17 July 2019

Bond Funds See Biggest Outflows Ever This Week

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Bond funds hit with biggest outflows ever during a rush to exit the bond market really hit a crescendo. In the week ended June 26, investors pulled a record $23.3 billion from bond funds.

All bond categories were affected by the pull-out: emerging markets, high yield, investment grade, and mortgage-backed securities funds all saw their largest weekly outflows ever.

Overall, bond funds shrank by 0.9% this week, marking the second-largest weekly loss on record in terms of assets under management. The week's outflows have been compared to the capitulation observed at the height of the financial crisis in October 2008.

The yield on the 10-year U.S. Treasury note hit a high of 2.64% on Monday, but the bonds have rallied this week, and the 10-year is now trading at 2.48%.

Below is a breakdown of this the asset flows:

Flows by Asset Class 

Bonds: largest weekly outflow ever of $23.3 billion; outflow of $58 billion over 4 weeks

Equities: $13.1 billion outflows this week; $6.4 billion via ETF's and $6.7 billion via managed funds

Precious metals: $2.8 billion outflows this week, with outflows for 20 straight weeks 

MMF: $4.3 billion inflows this week

Flows by Fixed Income Sector 

Emerging Market debt funds saw the largest ever outflows this week of $5.6 billion or 2.3% of AUM. The pace of the Emerging Market debt outflows has now only been exceeded by the 2008 melt-down. Other categories seeing their largest ever outflows this week:

  • Municipal Bonds outflows at $4.5 billion.
  • Investment Grade outflows at $4.9 billion.
  • High Yield bonds outflows at $6.8 billion
  • Mortgage Backed Securities outflows at $1.3 billion
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