The January issue of our Bond Fund Intelligence, which was sent to subscribers Friday morning, features the stories, "Top Stories & Funds of '22: $1 Trillion Decline, Ugly as Sin," which reviews the biggest news of the past year, and "Worldwide BF Assets Drop to $11.2 Trillion, Led by U.S.," which reviews ICI's Q3'22 bond fund totals." BFI also recaps the latest Bond Fund News and includes our Crane BFI Indexes, which show that bond fund returns fell slightly in December (after a big rebound in November) while yields were a little higher. 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 "Top Stories & Funds" article says, "The party finally came to an ugly end in 2022 as bond funds saw dramatic losses and outflows. Bond assets fell to about $4.5 trillion though bond ETFs remained above $1.2 trillion, as Fed rate hikes and outflows hammered the market. Below, we review last year's top stories from BFI, and also list the top-performing funds from 2022."

It continues, "Bond fund assets saw outflows of three-quarters of a trillion (-$742B) after seeing two straight years of $500 billion plus, double-digit asset gains. They stood at $4.565 trillion as of Nov. 30, 2022, down $1.064 trillion, or -18.9%, from a year earlier, according to ICI data. Bond ETFs totaled $1.261 trillion on 11/30/22, up $47.9 billion, or 3.9%, over 12 months. (Bond fund assets fell by $45.5 billion while Bond ETFs fell by $936 million in December, according to our BFI.) We show the average bond fund losing 8.48% in 2022, after returning 0.76% in 2021, 5.19% in 2020 and -7.46% in 2019."

Our "Worldwide BFs" piece states, "Bond fund assets worldwide decreased sharply in the latest quarter to $11.2 trillion, led lower by the four largest bond fund markets -- the U.S., Luxembourg, Ireland and China. We review the ICI's 'Worldwide Open-End Fund Assets and Flows, Third Quarter 2022 <i:https://www.ici.org/statistical-report/ww_q3_22>`_' release and statistics below."

It continues, "ICI's report says, 'Worldwide regulated open-end fund assets decreased 6.1% to $56.19 trillion at the end of the third quarter of 2022.... The Investment Company Institute compiles worldwide regulated open-end fund statistics on behalf of the International Investment Funds Association (IIFA).'"

Our first News brief, "Returns Decline, Yields Inch Up in Dec." states, "Bond fund returns were mixed in December with short funds rising and most other categories falling slightly. Yields were slightly higher across the board. Our BFI Total Index fell 0.14% over 1-month and is down 8.48% over 12 months. The BFI 100 fell 0.35% in Dec. and lost 9.81% over 1-year. Our BFI Conservative Ultra-Short Index was up 0.38% over 1-month and is up 0.38% for 1-year; Ultra-Shorts rose 0.44% but are down -0.92% over 12 mos. Short-Term returned 0.21% and -4.73%, and Intm-Term fell 0.43% and -11.99% over 1-year. BFI's Long-Term Index fell 0.69% and -15.51%. High Yield fell 0.38% in Dec. and fell 8.45% over 1-year."

A second News brief, "Office of Financial Research's Annual Report cites bond funds as a potential systematic risk. They write, 'Financial institutions face uncertainty and unique challenges due to higher interest rates and inflation, slower economic growth, and geopolitical risks.... Bond fund flows are sensitive to interest rate increases. Significant outflows may strain fixed-income markets. During historical periods of rising interest rates, the size of bond funds was much smaller, and dealer capacity to intermediate was much greater.'"

Another brief, "The FT Writes, 'Big Investors Warm to Bonds After Historic 2022 Sell-Off Boosts Yields <i:https://www.ft.com/content/974e805d-0163-40f7-8068-17473bed3af2>`_,' quotes the FT, 'Big investors are wading back into the bond market after this year's historic sell-off, with fund managers favouring debt relative to other asset classes for the first time since the wake of the 2008 financial crisis.'"

A BFI sidebar, "PIMCO Sees ETF Outflows," cites the Bloomberg story, "Pimco Ranks as 2022's Biggest Loser in $6.5 Trillion ETF Market." It explains, "A brutal 2022 for bonds delivered the worst year ever for Pacific Investment Management Co.'s exchange-traded fund business. Investors pulled nearly $3.6 billion from over 20 Pimco and Allianz-branded funds ... Bloomberg data show.'"

Finally, another sidebar, "'MStar: Ultrashorts Top in '22," says, "Morningstar's '2022's Best-Performing Bond Funds' explains 'In one of the worst years in history for bond funds, there were few places of refuge for investors. Only four Morningstar Medalist funds eked out positive returns in 2022. These funds carry Morningstar Analyst Ratings of Bronze, Silver, or Gold.'"

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