The September issue of our Bond Fund Intelligence, which will be sent to subscribers Monday morning, features the stories, "Vanguard Adds Core Tax-Exempt & Short Tax-Ex ETF," which quotes a press release on some new ETF launches, and "JPM: Short Bond Funds See Inflows; SEC on Form N-PORT," which discusses recent inflows into short-term bond funds. BFI also recaps the latest Bond Fund News and includes our Crane BFI Indexes, which show that bond fund returns rose again in August while yields were lower. 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.)
BFI's "Vanguard" article states, "A press release, 'Vanguard to Bolster Active Fixed Income Lineup with Two Active Municipal ETFs,' explains, 'Vanguard ... announced plans to introduce Vanguard Core Tax-Exempt Bond ETF (VCRM) and Vanguard Short Duration Tax-Exempt Bond ETF (VSDM), two active municipal ETFs ... managed by Vanguard Fixed Income Group. Vanguard intends to launch the ETFs before the end of the year.'"
The piece says, "Dan Reyes, head of Vanguard Portfolio Review Department, states, 'Vanguard Core Tax-Exempt Bond ETF and Vanguard Short Duration Tax-Exempt Bond ETF underscore the firm's ongoing efforts to improve long-term investor outcomes by offering broadly diversified, low-cost municipal bond exposures with the potential to outperform the market over time.... The new ETFs combine Vanguard Fixed Income Group's proven capabilities and talent with the convenience and flexibility of the ETF structure.'"
Our JPM article states, "J.P. Morgan published a, 'JPM Mid-Week US Short Duration Update,' which states, 'Short-duration bond funds experienced inflows again in both June and July, with AUMs increasing by $5.3bn and $12.4bn, respectively.... This marks three consecutive months of positive net flows into this sector, with July recording the largest monthly increase in net inflows in three years. This recent upward trend has turned total short-term bond fund AUMs positive for 2024, with total balances up $16.3bn to nearly $800bn as of 7/31. Leading the increases this year were short-term multi-asset funds with $8.3bn, ultrashort credit funds with $7.8bn, and ultrashort multi-asset funds with $4.4bn. In contrast, short-term government and ultrashort government funds saw decreases of $5.8bn and $1.5bn, respectively.'"
It states, "They write, 'The upward momentum into short-duration bond funds is not surprising considering their performance over the past few months. Since May, monthly total returns have remained positive, with July marking the strongest performance across all strategies thus far in 2024.... This trend aligns with the shift in investors' expectations of Fed policy over recent months, as evidenced by the narrowing spread between the 2-year Treasury yield and the Fed funds rate.'"
Our first News brief, "Returns Up Again, Yields Lower in August," explains, "Bond fund returns were higher for the 4th month in a row in August, while yields were again lower. Our BFI Total Index rose 1.12% over 1-month and is up 7.79% over 12 months. (Money funds rose 5.27% over 1-year as measured by our Crane 100 Index.) The BFI 100 increased 1.22% in August and 8.01% over 12 mos. Our BFI Conservative Ultra-Short Index was up 0.56% over 1-month and 6.02% for 1-year; Ultra-Shorts rose 0.62% and 6.72%. Short-Term returned 0.93% and 7.35%, and Intm-Term rose 1.42% in August and 7.86%. BFI’s Long-Term Index was up 1.52% and 8.25%. High Yield rose 1.27% in August and 10.49% for 12 mos."
A second News brief, "Bloomberg Says, 'Exodus Shrinks Wamco Key Bond Fund to Under $15 Billion.'" It says, "They explain, 'A wave of investor redemptions slashed the size of Western Asset Management Co.'s flagship core plus bond fund below $15 billion, a decline of more than one-third so far this year, as clients pull back after a federal investigation of the firm's veteran trader and co-chief investment officer Ken Leech.'"
Our next News brief comments, "WSJ's 'The Right Reason to Buy Bonds,'" explains, "If you buy bonds, make sure you do it for the right reasons. Whereas equity investors have had a bumpy few months, believers in the venerable 60/40 portfolio should be permitted a victory lap: ... [T]he 4.2% stock drawdown that happened last week translated into only a 1.9% loss for the 60/40 portfolio. 'Fixed income has finally regained its traditional hedging property,' said Roger Hallam, global head of rates at Vanguard. Nonetheless, the strongest reason to own bonds over the long term is an even simpler one: the income they generate."
A BFI sidebar, "MStar Cites 3 Top Managers," says, "Morningstar writes on 'How 3 Top Bond Fund Managers Are Preparing for Fed Rate Cuts.' it states, 'They tell us, 'Nearly two and a half years after the Federal Reserve kicked off a massive increase in interest rates, the bond market is heading in a new direction.... That should be good news for bond investors. The big unknowns are how far bond yields will come down, and at what pace. Also unknown is which corners of the bond market will outperform and which will lag. That has fund managers charting different potential approaches.'"
Finally, another sidebar, "BF Assets Up Again in August," tells readers, "Bond fund assets rose for the fourth straight month in August, increasing $31.2 billion to $2.834 trillion (after rising $54.3 billion last month), according to Bond Fund Intelligence. Assets have risen by $184.6 billion, or 7.0%, over 12 months. Bond ETFs jumped by $26.9 billion to $1.169T in August."
