Flows into investment-grade bond funds were negative up to the week ending November 25, 2015. According to Lipper’s funds flow data, investment-grade bond funds saw net outflows of $789.1 million up to the week ending November 25. This was compared to inflows amounting to $1.3 billion up to the week ending October 28, 2015.
Investment-grade bond funds had seen YTD (year-to-date) net inflows of $13.9 billion up to November 25, 2015. Investment-grade bond issuance fell 18.9% to $107.5 billion in November, as compared to $132.6 billion in October.
In November 2015, Halliburton Company (HAL), Lockheed Martin Corporation (LMT), AstraZeneca (AZN), Chevron Corporation (CVX), and Shell International Finance—a wholly owned subsidiary of Royal Dutch Shell (RDS)—were among the biggest issuers of investment-grade bonds. You can read the details of some of these issues in the previous part of this series.
Yield and spread analysis of corporate high-quality debt securities
Yields rose by 10 basis points from the previous month and ended at 3.5% on November 30, according to the BofA Merrill Lynch US Corporate Master Effective Yield.
As yields rose on a month-over-month basis, the monthly return on the Prudential Total Return Bond Fund Class A (PDBAX) fell marginally by 0.6%.
Unlike yields, the BofA Merrill Lynch Option-Adjusted Spread, or OAS, fell 3 basis points month-over-month to end at 1.62% on November 30. The OAS measures the average difference in yields between investment-grade bonds and Treasuries. A fall in this spread implied that the risk of high-grade bonds relative to Treasuries decreased.
For more analysis of mutual funds, please visit Market Realist’s Mutual Funds page.