uploads///US Investment Grade Bond Fund Flows

Investment-Grade Bond Funds Saw Record Inflows Last Week


Mar. 16 2016, Updated 10:05 a.m. ET

Investor flows

Flows into investment-grade bond funds were positive for the week ended March 9. According to Lipper funds flow data, investment-grade bond funds saw net inflows of $2.2 billion during the week, the highest since February 25, 2015. This was compared to outflows amounting to $761.0 million in the week ended March 2.

Investment-grade bond funds have seen year-to-date (or YTD) net outflows of $4.0 billion up to March 9, 2016.

Investment-grade bond issuance fell 24.7% last week to $44.6 billion, although it was the third highest YTD issuance.

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In the week to March 11, Berkshire Hathaway (BRK.A) and its wholly owned finance subsidiary, Berkshire Hathaway Finance Corporation; Commonwealth Bank of Australia; Toronto-Dominion Bank (TD); Fifth Third Bank, a subsidiary of Fifth Third Bancorp (FITB); and Masco (MAS) were among the large issuers of investment-grade bonds. You can read the details 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. Last week, Treasury yields rose across the yield curve. However, the investment-grade corporate bond yields fell last week.

The yields fell by three basis points and ended at 3.6% on March 11, according to the BofA Merrill Lynch US Corporate Master Effective Yield.

The Wasatch-1st Source Income Fund (FMEQX) and the Putnam Income Fund – Class A (PINCX) were down by 0.1% and 0.5%, respectively, last week.

Like yields, the option-adjusted spread (or OAS) fell by one basis point to end at 1.9% on March 11. The OAS measures the average difference in yields between investment-grade bonds and Treasuries. Thus, a fall in the spread implies 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.


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