uploads///US Investment Grade Bond Fund Flows

Investment-Grade Bond Funds Saw Massive Inflows Last Week

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Jul. 22 2016, Updated 1:08 p.m. ET

Investor flows

Flows into investment-grade bond funds were positive for the second consecutive week. According to Lipper fund flow data, investment-grade bond funds saw net inflows of $2.9 billion during the week ended July 13, 2016, the highest amount since May 4, 2016. This was lower than net inflows of $907.1 million in the week ended July 6.

Investment-grade bond funds had seen year-to-date (or YTD) net inflows of $18.4 billion as of July 13, 2016.

Meanwhile, investment-grade bond issuances fell from $26.2 billion in the week before last to $19.3 billion last week.

In the week ended July 15, 2016, Comcast (CMCSA), JPMorgan Chase (JPM), Bank of Montreal (BMO), and Australia and New Zealand Banking Group were among the largest issuers of investment-grade bonds.

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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 due to upbeat inflation and retail sales data. Investment-grade corporate bond yields also rose last week.

In the week ended July 15, 2016, yields rose by nine basis points and ended at 2.9% on July 15, according to the BofA Merrill Lynch US Corporate Master Effective Yield.

For the week ended July 15, the Hartford Total Return Bond HLS Fund Class IA (HIABX) fell by 0.4%, and the TIAA-CREF Bond Index Fund Retail Class (TBILX) fell by 0.8%. Meanwhile, the Vanguard Total Bond Market Index Fund (BND) and the iShares Intermediate Credit Bond ETF (CIU) fell by 0.1% and 0.5%, respectively, in the same period.

Unlike yields, the option-adjusted spread (or OAS) fell by eight basis points last week and ended at 1.5% on July 15, the biggest fall since July 13, 2015. The OAS measures the average difference in yields between investment-grade bonds and Treasuries. A fall in this spread last week implied that the risk of high-grade bonds relative to Treasuries had decreased.

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