Flows into investment-grade bond funds were positive for the 15th consecutive week. According to Lipper funds flow data, investment-grade bond funds saw net inflows of $1.8 billion during the week ending June 22—compared to net inflows of $499 million in the week ending June 15.
Investment-grade bond funds have seen year-to-date net inflows of $15.2 billion as of June 22, 2016.
Meanwhile, investment-grade bond issuance fell from $5.7 billion in the previous week to $2.8 billion last week.
In the week to June 24, Commonwealth Edison Company—a unit of Exelon Corporation (EXC), New York and Presbyterian Hospital, Broadridge Financial Solutions (BR), and Republic Services (RSG) were among the large issuers of investment-grade bonds. You can read the details 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 across the yield curve. Investment-grade corporate bond yields also fell last week.
The yields fell by four basis points and ended at 3% on June 24—the lowest since April 29, 2015, according to the BofA Merrill Lynch US Corporate Master Effective Yield.
For the week ending June 24, the Hartford Total Return Bond HLS Fund – Class IA (HIABX) rose 0.2% and the TIAA-CREF Bond Index Fund – Retail Class (TBILX) rose 0.1%. Meanwhile, the Vanguard Total Bond Market Index Fund (BND) and the iShares Intermediate Credit Bond ETF (CIU) rose 0.1% and 0.2%, respectively, for the same period.
Unlike yields, the OAS (option-adjusted spread) rose slightly by one basis point last week and ended at 1.6% on June 24. The OAS measures the average difference in yields between investment-grade bonds and Treasuries. 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.