Bond funds worldwide gain $2.11bn after record outflow

July 07, 2013 - 1:15:52 am

NEW YORK: Global investors committed $2.11bn to bond funds in the latest week after pulling a record $23.3bn out of the funds the prior week, data from EPFR Global showed.

Funds that hold high-yield “junk” bonds gained $384m in new cash in the week ended July 3, recovering from record outflows of $6.8bn the prior week. Emerging market bond funds, meanwhile, suffered outflows of $956m over the week, an improvement from record-high outflows of $5.6bn the prior week.

The inflows into bond funds overall in the week ended July 3 came as three US Federal Reserve policymakers sought to downplay the notion that the central bank would end its accommodative monetary policy any time soon.

Fed Chairman Ben Bernanke triggered a selloff in bond markets on May 22, and reiterated at a press conference on June 19, that the Fed could reduce its $85bn in monthly purchases of Treasuries and agency mortgages stimulus later this year. He added that the central bank could halt its bond-buying programme altogether by mid-2014 if the economy looked strong enough.

US bond funds in particular recovered in the latest week, pulling in $2.65bn in new cash after suffering outflows of $10.6bn the prior week. The yield on the benchmark 10-year US Treasury note fell 4 basis points over the week, after having risen roughly 19 basis points the prior week. As yields rise, prices fall.

The yield on the 10-year Treasury jumped to 2.73 percent on Friday, its biggest one-day yield rise in about two years after a Labor Department report showed US employers adding 195,000 jobs in June. The report added to sentiment that the Fed will reduce its asset purchases. “We’re not surprised to see money coming in to capture those higher yields,” said Tim Ghriskey, chief investment officer of Solaris Group in Bedford Hills, New York.