Money poured into EPFR Global-tracked Bond Funds during the first week of June, pushing year-to-date inflows north of the $260 billion mark. U.S. Bond Funds recorded their biggest weekly inflow since early February, Emerging Market Bond Funds extended their longest inflow streak since the second quarter of 2013 and Global Bond Funds absorbed another $2.7 billion.
At the asset class level both High-Yield and Total Return Bond Funds took in over $1 billion, flows into Mortgage Backed, Municipal and Inflation Protected Bond Funds climbed to three, seven and 12-week highs, respectively, and Bank Loan Funds extended an inflow streak stretching back to early November.
Flows into Emerging Markets Bond Funds continue to favor geographically diverse funds with hard currency mandates. With so much of the fresh money going to GEM Bond Funds, year-to-date flows from all EPFR Global-tracked Bond Funds to individual markets have been heavily influenced by the weightings of that fund group whose top five single country allocations are currently Brazil, Mexico, Indonesia, Russia and Turkey.
Commitments to Europe Bond Funds climbed to a 44-week high, with investors again opting for diversified over single country exposure, ahead of the European Central Bank’s June meeting which concluded with no changes to its current policies and a denial that "tapering" of its program was discussed. Euro-denominated flows favor Short and Intermediate Term Corporate Bond Funds.
U.S. Bond Funds started June with every major sub-group recording net inflows that ranged from $33 million for Short Term Government Bond Funds to $1.5 billion for Short Term Mixed Bond Funds. As a percentage of AUM, Long Term Government and Corporate Bond Funds scored best. Flows to U.S. Municipal Bond Funds also held up despite Puerto Rica’s slide into bankruptcy and the latest ratings downgrade for the state of Illinois, leaving its debt very close to “junk” territory.
Investors looking to the U.S. also continue to increase their exposure to convertible bonds. Since they bottomed out in the third quarter of last year, flows to U.S. Convertible Bond Funds have been positive to the tune of over $1 billion.