With some investors looking for places to park their money until tensions with North Korea die down or they get back from summer vacations, flows into EPFR-tracked bond funds were positive for the 21st straight week in early August as collective year-to-date inflows pushed over the $365 billion mark. The week ending August 9 saw flows into Europe bond funds hit a 53-week high, Asia Pacific bond funds record inflows for only the eighth time so far this year, Global bondfFunds take in over $1 billion for the 10th straight week, and emerging-markets bond funds extend their longest inflow streak since a 50-week run ended in the second quarter of 2013.
At the asset-class level, municipal bond funds posted inflows for the 25th time in the 32 weeks year to date, flows to Europe and U.S. inflation-protected bond funds hit 16- and 21-week highs, mortgage-backed bond funds recorded their biggest inflow since late January, and total return bond funds attracted fresh money for the 28th consecutive week.
Europe bond fund flows again favored those with corporate mandates. Flows to investment-grade corporate funds climbed to a six-week high, and Europe high-yield bond funds posted consecutive weekly inflows for the first time since the third week of June. At the country level, U.K. bond funds recorded their biggest inflow in over three months.
Investors focused on investment-grade U.S. corporate debt, which moved down the curve, with both short- and intermediate-term corporate bond funds taking in over $275 million while long-term corporate bond funds experienced the heaviest redemptions among U.S bond fund groups in both cash and percentage-of-AUM terms.
Emerging-markets local-currency bond funds outgained their hard-currency counterparts during the first week of August, and EM corporate bond funds attracted twice as much new money as EM sovereign funds. Investors also opted for active management: EM bond ETFs absorbed only 15 percent of the week's flows, half their year-to-date average of 30 percent.
Among EM country fund groups, South Africa bond funds posted inflows for the 10th week running despite the country's political infighting, its slide back into technical recession and the danger that its credit rating will drop into "junk" territory. Moody's is currently the only major agency that still rates South Africa as investment grade, but that has not stopped South Africa bond funds from racking up steady performance gains so far this year.