(April 8, 2013) — Bond funds inflows have hit an 11-week high as investors have been searching for yield – but not in equity markets.
Inflows to globally-registered bond funds reported a €4.89 billion inflow in the week to April 3, outstripping equity funds for the third straight week, data monitor EPFR said. This was the first time bonds out strode equity for three successive weeks since October, and the bond inflows were almost double the $1.9 billion that ended up in equity funds.
“Investors showed some willingness to take on more risk in pursuit of yield,” the firm said, despite international consternation over North Korea’s war-mongering, unorthodox monetary policy in large economies, and poor employment data on either side of the Atlantic.
“Emerging markets, high yield, and floating rate bond funds all took in over $850 million for the week while Europe bond and emerging markets equity funds saw their modest outflow streaks end.”
High yield, emerging markets, and global bond funds all received higher than usual inflows, EPFR said, while investor confidence returned to corporate debt in Europe. The sector snapped up a third of all new money into the region’s fixed-income products as investor confidence grew. This turnaround broke an 11-week streak of outflows.
Even US municipal bonds could not be rocked by news of looming bankruptcy in Stockton, California, and saw renewed inflows from investors – the first modest inflows to the sector in a month.
Some equity funds enjoyed inflows, however. Japan-focused funds were boosted as investors awaited good news from the country’s central bank regarding its quantitative easing programme.
Global equity funds brought in some new cash, but at the lowest levels in 13 weeks, whereas emerging market equity funds brushed off poor jobs and manufacturing data from the US and Europe to receive the first net inflows since the beginning of March.
Infrastructure funds were buoyed by announcements from some influential national governments regarding additional support to get investors to buy in to projects. This included President Obama’s news that non-US pensions would receive tax breaks if they invested in infrastructure projects in the country and the UK Treasury backing a platform to bring together large pools of retirement capital to be better steered towards developments.
Infrastructure funds saw inflows of over $30 million last week, improving on almost a year of outflows.
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