uploads///US Investment Grade Bond Fund Flows

Investment-Grade Bond Funds Witnessed Inflows for the Third Week


Nov. 12 2015, Updated 1:06 p.m. ET

Investor flows

The flows into investment-grade bond funds were positive for the week ending October 28. This was the third consecutive week of inflows. Investment-grade bond funds saw net inflows of $235.8 million during the week—compared to inflows of $847.3 million in the week ending October 21.

Investment-grade bond funds saw YTD (year-to-date) net inflows of $14.7 billion as of October 30, 2015.

The investment-grade bond issuance rose by 50.1% last week to $38.2 billion—compared to $25.5 billion in the previous week.

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In the week to October 30, Microsoft (MSFT), ACE INA Holdings, PNC Bank National Association—a subsidiary of the PNC Financial Services Group, (PNC), Mead Johnson Nutrition (MJN), Hyundai Capital America, and Capital One Financial (COF) 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.

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.

The yields rose by six basis points from the previous week. They ended at 3.4% on October 30, according to the BofA Merrill Lynch US Corporate Master Effective Yield.

Due to the rise in yields, the returns on the Prudential Total Return Bond A (PDBAX) fell by 0.45% last week.

While yields rise, the OAS (option-adjusted spread) fell by two basis points to end at 1.7% on October 30. The OAS measures the average difference in yields between investment-grade bonds and Treasuries. As a result, 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 Mutual Funds page.


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