The October issue of our Bond Fund Intelligence, which was sent to subscribers Monday morning, features the stories, "Worldwide BF Assets Hit $12.2 Trillion, Led by US, Lux, Ireland," which reviews ICI's "Worldwide Open-End Fund Assets and Flows, Second Quarter 2023," and "Ultra-Short Bond Funds Cool Down at European MFS," which quotes from our recent conference on cash funds and beyond in Europe. BFI also recaps the latest Bond Fund News and includes our Crane BFI Indexes, which show that bond fund returns plunged in September while yields jumped. We excerpt from the new issue below. (Contact us if you'd like to see our latest Bond Fund Intelligence and BFI XLS spreadsheet, or our Bond Fund Portfolio Holdings data.)
Our "Worldwide BF Assets" piece states, "Bond fund assets worldwide increased in the latest quarter to $12.2 trillion, led higher by some of the largest bond fund markets -- Brazil, China, the U.S. and Ireland. ICI's 'Worldwide Open-End Fund Assets and Flows' says, 'Worldwide regulated open-end fund assets increased 3.1% to $65.07 trillion at the end of the second quarter of 2023.... ICI compiles worldwide regulated open-end fund statistics on behalf of the International Investment Funds Association (IIFA).'"
It continues: "They explain, 'The growth rate of total regulated open-end fund assets reported in US dollars was decreased by US dollar appreciation over the second quarter of 2023.... Bond fund assets increased by 1.8% to $12.21 trillion in the second quarter. Balanced/mixed fund assets decreased by 0.1% to $7.22 trillion in the second quarter, while money market fund assets increased by 2.7% globally to $9.72 trillion.'"
Our "European MFS" article states, "Crane Data recently hosted its 9th annual European Money Fund Symposium in Edinburgh, Scotland, which featured two days of discussions on offshore money funds. It also included a segment on, 'Ultra-Short Bond Funds & Standard MMFs,' run by Abis Soetan of Fitch Ratings and including Neil Hutchison of J.P. Morgan Asset Management and Alastair Sewell of Aviva Investors."
It states: "Soetan says, 'When you step out of the regulated money market fund world, you then have the short-term bond funds. Here there's no limit to the requirements on credit quality. You can take on a lot more credit risk.... Duration requirements [are roughly] up to 3 years.... The risks can be quite varied, so investors need to [understand] the risks to invest in these strategies.'"
Our first News brief, "Returns Plunge, Yields Jump in Sept.," states, "Bond fund returns crashed and yields soared last month. Our BFI Total Index decreased 1.51% over 1-month but is up 3.62% over 12 months. The BFI 100 fell 1.71% in Sept. but rose 3.03% over 1-year. Our BFI Conservative Ultra-Short Index was up 0.37% over 1-month and is up 4.80% for 1-year; Ultra-Shorts rose 0.35% and are up 4.90% over 12 mos. Short-Term fell 0.24% and rose 3.69%, and Intm-Term decreased 2.28% and rose 1.41% over 1-year. BFI's Long-Term Index fell 3.05% and rose 1.36%. High Yield fell 0.80% in Sept. but is up 9.34% over 1-yr."
A second News brief, "Morningstar's '`How the Largest Bond Funds Did In Q3 2023' comments, 'A negative third quarter has put investors in many of the largest bond funds on track for a nearly unheard-of third consecutive year of losses.... In response, yields on intermediate and long-term bonds rose sharply, and bond funds focused on those maturities suffered.... Among the largest passive funds, only short-term and ultrashort-term bond funds made gains.'"
Our next News brief, "Reuters on Bond Fund Outflows," quotes the article, "US bond funds suffer outflows on rate worries; money market funds gain traction." It says, "U.S. bond funds saw significant outflows in the week ending Oct. 4, driven by concerns about prolonged elevated interest rates, while money funds garnered substantial inflows as investors recalibrated their risk exposure amid a bond market sell-off.'"
A BFI sidebar, "MStar: Short-Term Hurting," says, "Morningstar publishes, '6 Charts On Where Bond Fund Investors Are Putting Their Money.' They say, 'Investors are choosing safer funds and eschewing short-term ones. Investors have favored bond funds over stock funds for many years, but as interest rates stay elevated, they are shifting where they put their money. Prior to the big rise in interest rates in 2022, investors gravitated toward short-term and high-yield bond funds. Now, with interest rates higher across the board, investors are choosing safer government and long-term bond funds and taking advantage of high interest rates on money market funds.'"
Finally, another sidebar, "IBD Features TRP's Obaza," comments, "Investors' Business Daily writes on 'How A Top T. Rowe Price Bond Manager Scores A Safe 6.15% Yield.' They tell us, 'With yields surging and calls for at least one more Federal Reserve rate hike swirling as inflation remains stubbornly high, bonds are the talk of Wall Street. All the focus on bond yields gone wild has investors wondering how high rates will go and whether it's a good time to buy bonds, many which now pay interest of 5% or more. So, with all eyes on fixed-income, Investor's Business Daily caught up with Alex Obaza, manager of T. Rowe Price Ultra Short-Term Bond (TRBUX), to get an insider's view of the turmoil in the bond market.'"
