uploads///US Investment Grade Bond Fund Flows

Investment-Grade Bond Funds Saw Outflows in Week Ended November 25

Lynn Noah - Author

Nov. 20 2020, Updated 12:46 p.m. ET

Investor flows

Flows into investment-grade bond funds were negative for the week ended November 25. Investment-grade bond funds saw net outflows of $1.46 billion during the week after witnessing two consecutive weeks of inflows.

This was compared to inflows amounting to $0.945 billion in the week ended November 18. Investment-grade bond funds have seen year-to-date (or YTD) net inflows of $13.93 billion up to November 27, 2015.

Investment-grade bond issuance fell sharply last week due to the Thanksgiving holiday. The issuance was down by 91.9% last week to $2.65 billion as compared to $32.8 billion in the previous week.

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In the week ended November 27, Lloyds Banking Group Plc (LYG), Stifel Financial Corporation (SY), HCP Inc. (HCP), and Metlife Global Funding I, a subsidiary of MetLife, Inc. (MET) 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. Last week, Treasury yields fell at the long end of the yield curve. Investment-grade corporate bond yields also fell marginally last week.

Yields were down by one basis point from the previous week and ended at 3.50% on November 27, according to the BofA Merrill Lynch US Corporate Master Effective Yield.

Due to the fall in yields, the weekly returns on the Janus Flexible Bond Fund – Class A (JDFAX) and the American Century Diversified Bond Fund – Class A (ABNDX) rose by 0.05% and 0.2%, respectively.

Unlike yields, the option-adjusted spread (or OAS) also rose one basis point to end at 1.63% on November 27. The OAS measures the average difference in yields between investment-grade bonds and Treasuries. So, a rise in this spread implied that the risk of high-grade bonds relative to Treasuries increased.

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


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