Flows into EPFR-tracked Bond Funds climbed to a seven-week high in late September as year-to-date commitments to this fund group pushed past the $460 billion mark. Nearly two-thirds of that headline number has gone into U.S. Bond Funds, which look set to break the full-year inflow record set in 2012. Retail redemptions did, however, hit a six-week high.
At the asset class level, the week ending Sept. 27 saw flows into Inflation Protected, High Yield and U.S. Convertible Bond Funds hit seven, 10 and 11 week highs respectively and Mortgage Backed Bond Funds post inflows for the 11th time in the past 12 weeks, while Bank Loan Funds extended their longest run of outflows since the start of 2016.
Europe Inflation Protected Bond Funds recorded their biggest inflow since late January and flows to Norway Bond Funds rebounded to a nine-week high as Europe Bond Funds overall saw the previous week’s outflows partially reversed. Investors did pull money out of Italy Bond Funds for the 24th consecutive week, as some cast a nervous eye at the general election the country is required to hold by May of next year. Italy is still getting support from both Europe Regional Bond Funds and Global Bond Funds. The latter have been cautiously increasing their allocations for this market since they touched a nearly five-year low in middle of the first quarter.
Emerging Markets Corporate Bond Funds snapped a two-week run of modest outflows, with Asia ex-Japan and Latin America Funds receiving equal sums, and EM High Yield Bond Funds took in fresh money for the eighth consecutive week. At the country level, Russia Bond Funds extended their longest outflow streak since the second quarter of 2015. Turkey Bond Funds recorded their biggest inflow since late May and India Bond Funds took in fresh money for the 23rd week running.
Intermediate Term Mixed Funds were the U.S. Bond Fund group to post the largest inflows, in cash terms, and Intermediate Term Investment Grade Corporate Funds in flows as a percentage of asset under management terms. All four of the major corporate groups (high yield, short, intermediate and long term) recorded inflows, a trend that David Ader, Informa Financial Intelligence’s chief macro strategist, believes should be followed with caution.
"Looking at the oft-used, less heeded, chart of U.S. Corporate Debt as a percentage of GDP (see below) and its current 45.3 percent level compared to history the upshot is, simply, that there is a lot of debt out there and at least as much–if not more–than before the last crisis," he said in a recent note.