As summer winds down flows for EPFR-tracked Bond Funds are sticking to the same script they have followed since early May. The week ending Aug. 30 saw Global Bond Funds absorb another $1.8 billion as year-to-date inflows climbed past the $74 billion mark, U.S. Bond Funds take in fresh money for the 24th straight week, Europe Bond Funds record inflows for the 17th time in the past 18 weeks and Emerging Markets Bond Funds for the 33rd time in the 35 weeks year-to-date while Asia Pacific Bond Funds extended an outflow streak stretching back to late May.
At the asset class level Bank Loan Bond Funds posted consecutive weekly outflows for the first time since late the second quarter of last year, High Yield Bond Funds snapped a two week run of outflows, Convertible Bond Funds experienced net redemptions for the 11th time in the past 13 weeks and Total Return Bond Funds recorded their 31st consecutive weekly inflow.
Flows to Emerging Markets Bond Funds favored funds with hard currency and sovereign debt mandates. EM Sovereign Bond Funds took in 13 times the amount absorbed by EM Corporate Funds. At the country level, flows into China Bond Funds hit a 48-week high. Managers of diversified Global Emerging Markets (GEM) Bond Funds, which have absorbed the bulk of all flows to EM Bond Funds this year, recently boosted their allocation for China to a five month high. But greater comfort with Latin American and Emerging European markets is reflected in the year-to-date flows from all EPFR-tracked Bond Funds to major emerging markets.
Europe Bond Fund flows again favored funds with investment grade corporate mandates over their sovereign debt counterparts and U.K. Bond Funds continued the lead the way among country fund groups when it comes to attracting fresh money. When flows are measured as a percentage of AUM, France and Norway Bond Funds are the best loved year-to-date, Italy and Spain Bond Funds the most shunned.
Among the U.S. Bond Fund groups there was a noticeable shift away from funds investing in long term debt. While Intermediate and Short Term Funds both attracted over $1 billion, Long Term U.S. Bond Funds recorded their biggest outflow since the final week of January. Investors remain comfortable with municipal debt despite Puerto Rico’s partial default and predictions that Illinois or Connecticut will be next: Municipal Bond Funds have taken in fresh money for eight weeks running and 22 of the past 24.
Cameron Brandt is Director of Research for EPFR Global, an Informa Financial Intelligence company.