Global bond funds see higher outflows due to rates expectations

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Investors stepped up selling in global bond funds in the seven days to 19th January as hawkish remarks from U.S. Fed officials amid rising inflationary pressure solidified expectations that the central bank will tighten monetary policy as early as March.

Investors offloaded global bond funds of $4.12B, that topped previous weeks outflows by about 69%, Refinitiv Lipper data showed.

Two-year U.S. Treasury yields, which track short-term interest rate expectations, rallied to a 23-month high this week after Federal Reserve officials last week signalled a policy rate hike in March. 

According to Reuters, this stoked “fears that inflation may become more persistent, with oil prices reaching a seven year high on Wednesday amid supply concerns and political tensions.”

Investors sold U.S. and European bond funds of $1.69B and $2.55B respectively, although they purchased about $60M worth of Asian funds.

Global high yield and short-and-medium term bond funds faced net selling of $2.63B and $0.83B respectively, which marked a second straight week of outflows.

Meanwhile, inflation protected, and government bond funds attracted inflows of $777M and $528M respectively.

Global investors remailed net buyers in equity funds with net purchases of $8.08B, although a five-week low.

Reuters also mentions that “financial sector equity funds drew inflows for a fourth successive week, worth $2.85B, health care saw purchases of $511M, however, investors sold tech and consumer discretionary funds of $886M and $514M respectively.”

Global money market funds posted the biggest weekly net selling since at least end-Feb 2020, as they faced outflows of $80.12B.

Among commodities, precious metal funds attracted $328M in inflows after an outflow in the previous week, although energy faced a second straight weekly outflow, amounting $60M.

An analysis of 24,121 emerging market funds showed equity funds received $3.1B in net buying, the biggest inflow since mid-March 2021, while bond funds faced outflows of $2.07B.

Source: Reuters

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