uploads///US Investment Grade Bond Fund Flows

Investment-Grade Bond Funds Witnessed Inflows


Nov. 20 2020, Updated 12:50 p.m. ET

Investor flows

The flows into investment-grade bond funds were positive for the week ending November 18. Investment-grade bond funds saw net inflows of $945.0 million during the week—compared to inflows of $82.7 million in the week ending November 11. Investment-grade bond funds saw YTD (year-to-date) net inflows of $15.4 billion until November 20, 2015.

The investment-grade bond issuance fell marginally by 0.4% last week to $32.8 billion—compared to $32.9 billion in the previous week.

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In the week to November 20, Lockheed Martin (LMT), Westpac Banking, Novartis Capital—a subsidiary of Novartis AG (NVS), Duke Energy (DUK), and General Motors Financial Company—a wholly owned subsidiary of General Motors (GM) were among the biggest issuers of investment-grade bonds. You can read about 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. Last week, Treasury yields fell at the long-end of the yield curve. Investment-grade corporate bond yields also fell mainly due to the likelihood of a rate hike in December.

The yields fell by one basis point from the previous week. They ended at 3.5% on November 20, according to the BofA Merrill Lynch US Corporate Master Effective Yield.

Due to the fall in the yields, the weekly returns on the Hartford Total Return Bond HLS Fund – Class IA (HIABX) and the Prudential Total Return Bond Fund – Class A (PDBAX) rose by 0.2% and 0.1%, respectively.

Like yields, the OAS (option-adjusted spread) also fell by one basis point. It ended at 1.6% on November 20. The OAS measures the average difference in yields between investment-grade bonds and Treasuries. As a result, a fall in this spread implies that the risk of high-grade bonds relative to Treasuries fell.

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


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