Flows into Europe and Emerging Markets Bond Funds rebounded during the third week of July as inflation data from the US and Europe prompted fixed income investors to revise – again – their predictions for U.S. interest rate hikes and tapering of the ECB’s quantitative easing program. Overall flows into U.S. Bond Funds climbed to a six-week high and Global Bond Funds absorbed over $1 billion for the seventh straight week while Asia Pacific Bond Funds recorded their 22nd weekly outflow so far this year.
At the asset class level High Yield Bond Funds recorded their biggest inflow since early April and Total Return Bond Funds took in fresh money for the 25th straight week while redemptions from all Convertible and Bank Loan Bond Funds hit six and 65-week highs respectively.
Emerging Markets Hard and Local Currency Bond Funds both recorded inflows during the week. At the regional level EMEA Government and Corporate Bond Funds attracted the biggest inflows, helped by the steady flows to South Africa Bond Funds despite that country’s fractious politics and the very real danger it could lose its investment grade rating.
U.S. Bond Fund flows favored groups with corporate mandates. In addition to the commitments to U.S. High Yield Funds, investors steered over $800 million – a five week high – to Long Term U.S. Corporate Bond Funds and over $300 million to both Short and Intermediate Term Corporate Funds. The combination of lower rate hike expectations and the lack of progress the current U.S. administration has made on the policy front helped Municipal Bond Funds post their biggest inflow since late June.
Investors looking to Europe also focused on corporate debt. Europe Investment Grade Corporate Bond Funds took in fresh money for the 12th straight week. Europe High Yield Funds, however, extended their longest outflow streak since late last year. At the country level U.K. Bond Funds attracted fresh money for the first time in four weeks.