Investment-Grade Bond Funds Witness Back-to-Back Inflows



Investor flows

Flows into investment-grade bond funds were positive for the week ended October 21, 2015. It was the second successive week of inflows. Investment-grade bond funds saw net inflows of $847.3 million during the week. This was compared to inflows of $1.1 billion in the week ended October 14.

Investment-grade bond funds have seen year-to-date (or YTD) net inflows of $14.5 billion up to October 23, 2015.

Investment-grade bond issuance was down 21.7% in the week ended October 21, to $25.5 billion compared to $32.5 billion in the previous week.

In the week to October 23, Citigroup (C), Coca-Cola (KO), JPMorgan Chase & Co. (JPM), Royal Bank of Canada (RY), and FedEx (FDX) were among the biggest issuers of investment-grade bonds. You can read the details of some of these issues in Part 4 of this series.

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Yield and spread analysis of corporate high-quality debt securities

Investment-grade bond yields usually follow cues from the Treasuries market. Treasury yields rose across the yield curve week-over-week. However, investment-grade corporate bond yields didn’t see any movement week-over-week.

Yields remained unchanged from the previous week and ended at 3.4% on October 23, according to the BofA Merrill Lynch US Corporate Master Effective Yield.

The Prudential Total Return Bond A (PDBAX) rose by 0.05% last week.

The option-adjusted spread (or OAS) fell 5 basis points to end at 1.7% on October 23. The OAS measures the average difference in yields between investment-grade bonds and Treasuries. Thus, a fall in this spread implied that the risk of high-grade bonds relative to Treasuries decreased.

For more analysis on mutual funds, please visit Market Realist’s Fixed Income ETFs page.


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