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FUND FLOWS: Bonds Continue Their Rebound While the Fed Holds Its Rate

But U.S. bond funds took in less than others compared with previous weeks.

Europe and Emerging Markets Bond Funds saw flows continue their rebound heading into the final days of July, with investor commitments hitting four- and five-week highs, respectively, as fears of premature tightening by the European Central Bank continued to ebb and the U.S. Federal Reserve kept its benchmark interest rate on hold. Global Bond Funds also extended their run of $1 billion plus inflows during the week ending July 26. But redemptions from Asia-Pacific Bond Funds hit a year-to-date high, and flows to U.S. Bond Funds came in at less than a third of the previous week’s total.

At the asset-class level, flows into Bank Loan Bond Funds turned positive a week after these funds recorded their biggest collective outflow in over a year, Convertible Bond Funds posted outflows for the seventh time in the past eight weeks, and commitments to Municipal Bond Funds hit a five-week high.

Flows to Europe Bond Funds favored Norway Bond Funds at the country level, and funds with investment-grade corporate mandates over those dedicated to junk and sovereign debt. France remains the largest single-country allocation among diversified Europe Bond Funds, although the average weighting is currently at a year-to-date low, followed by Italy and Spain.

U.S. Bond Fund flows also showed a bias toward funds with corporate mandates. Long-Term U.S. Corporate Funds recording the week’s biggest inflow in percentage of AUM terms, while Long-Term U.S. Government Funds suffered the biggest redemptions in both cash and percentage of AUM terms.

For the second week running, both Emerging Markets Hard and Local Currency Bond Funds recorded inflows, and investors continue to park money in EM High-Yield Funds, which last recorded outflows in mid-March. At the country level, Russia Bond Funds posted outflows for the first time since late October, although demand in the primary market for the country’s high-yielding debt remains strong.

Cameron Brandt is director of research for EPFR Global, an Informa Financial Intelligence company.

TAGS: Mutual Funds
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