Fresh doubts that the current U.S. administration’s reflationary rhetoric will be translated into action saw flows into EPFR Global-tracked Bond Funds hit a nine-week high in late March. Emerging Markets and Global Bond Funds both attracted over $2 billion for the second week running and U.S. Bond Funds moved closer to posting their biggest quarterly inflow since 3Q12.
With investors reassessing their expectations for fiscal stimulus in the world’s largest economy (at least for this year) and the number of interest rate hikes needed to prevent overheating, flows into Bank Loan Funds slipped another notch. Commitments to Inflation Protected Bond Funds were also well below the weekly averages seen in December, January and February.
Europe Bond Funds ended the quarter by posting their third straight outflow and ninth in the 13 weeks YTD. There are lingering fears that the European Central Bank will repeat past mistakes and tighten before the latest recovery in the Eurozone’s economic growth gains real momentum. But U.K. Bond Funds posted their biggest inflow of the year so far during a week when the formal process for leaving the European Union was invoked as investors looked for places to park cash while they see how the Brexit negotiations play out.
The latest flows into Emerging Markets Bond Funds took the YTD total north of the $20 billion mark, with over $11 billion committed to funds with hard currency mandates and $9 billion to EM Local Currency Funds. During the same period last year all EM Bond Funds posted a net outflow of $3.6 billion with roughly $1.1 billion redeemed from both hard and local currency funds. At the country level Russia Bond Funds extended an inflow streak stretching back to late October while redemptions from Hungary Bond Funds hit record highs.
Investors focused on the U.S. steered over $2 billion into U.S. Intermediate Term Mixed Bond Funds and over $750 million into U.S. Total Return Bond Funds. Once again most sub-groups, with the exception of Long- and Short-Term Government Bond Funds and High Yield Bond Funds, recorded fair-to-solid inflows.
Cameron Brandt is Director of Research for EPFR Global, an Informa Financial Intelligence company.