uploads///US Investment Grade Bond Fund Flows

Investment-Grade Bond Funds Saw Outflows after 3 Weeks of Inflows


Nov. 11 2015, Updated 8:09 a.m. ET

Investor flows

Flows into investment-grade bond funds were negative for the week ended November 4, after three consecutive weeks of inflows. Investment-grade bond funds saw net outflows of $357.8 million during the week. In comparison, inflows amounted to $235.8 million in the week ended October 28.

Investment-grade bond funds have seen year-to-date (or YTD) net inflows of $14.4 billion up to November 6, 2015.

Investment-grade bond issuance was down by 14.0% last week to $32.9 billion as compared to $38.2 billion in the previous week.

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In the week to November 6, Halliburton (HAL), Shell International Finance – a 100% subsidiary of Royal Dutch Shell (RDS.A), Ford Motor Credit Company – a subsidiary of the Ford Motor Company (F), TransCanada Pipelines Limited (TRP), and International Business Machines (IBM) were among the biggest issuers of investment-grade bonds. You can read the details of some of these issues in part four of this series.

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. Investment-grade corporate bond yields followed Treasury yields and rose as well.

Yields were up by 15 basis points from the previous week and ended at 3.6% on November 6, according to the BofA Merrill Lynch US Corporate Master Effective Yield. Due to the rise in yields, the returns on the American Century Diversified Bond Fund – Class A (ADFAX) fell by 0.8% last week.

While yields rose, the option-adjusted spread (or OAS) fell four basis points to end at 1.6% on November 6. 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 fell.

For more analysis on mutual funds, please visit Market Realist’s Mutual Funds page.


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