uploads///US Investment Grade Bond Fund Flows

Week Ending May 27 Sees Outflows in Investment-Grade Bond Funds


Nov. 20 2020, Updated 2:36 p.m. ET

Investor flows

Flows into investment-grade (LQD) bond funds ventured into negative territory for the week ended May 27. Investment-grade bond (AGG) funds saw net outflows of $127.1 million in the week. This was compared to inflows worth $932.9 million in the previous week.

Even with these outflows, investment-grade bonds have attracted inflows of $28.9 billion in 2015 year-to-date.

Investment-grade corporate bond issuance last week was the lowest in May. However, overall, May witnessed the largest monthly volume of all time.

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PNC Bank, a subsidiary of the PNC Financial Services Group (PNC), UBS Group (UBS), Home Depot (HD), Time Warner (TWX), and KeyBank, a group holding of KeyCorp (KEY), were the biggest issuers of investment-grade bonds in the week to May 29. You can read the details of these issues in part four of this series.

Yields analysis for corporate high quality debt securities

Investment-grade bond yields usually follow cues from the Treasuries market. Treasury yields fell last week, thus leading to a fall in investment-grade corporate bond yields as well. Investment-grade corporate bond yields fell sharply at the beginning of the holiday-shortened trading week. Yields ended at 3.06% on May 29, the weekly low, and were down eight basis points from the previous week, according to the BofA Merrill Lynch US Corporate Master Effective Yield.

The option-adjusted spread (or OAS) rose three basis points week-over-week to end at 1.37%. The OAS measures the average difference in yields between investment-grade bonds and Treasuries. Thus, a rise in this spread implied that the risk of high grade bonds relative to Treasuries increased.

Prices of investment-grade debt ETFs rise

As yields fell, prices of investment-grade bond ETFs rose due to the inverse relationship between prices and yields. The iShares iBoxx $ Investment Grade Corporate Bond Fund (LQD) posted a rise of 0.4% in the week ended May 29. In the same period, the Core Total US Bond Market ETF (AGG) and the Vanguard Total Bond Market ETF (BND) rose by 0.3% each.

For more bond market trends and analysis, please visit Market Realist’s Fixed Income page.


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