The May issue of our Bond Fund Intelligence, which was sent out to subscribers Tuesday morning, features the lead story, "Bond Funds & Bond ETFs Hit $5 Trillion Level; Still Going," which discusses the strong rebound in BF inflows; as well as the article, "ICI 2019 Fact Book Reviews Bond Fund Trends, Flows," which excerpts from the Investment Company Institute's latest annual. BFI also recaps the latest Bond Fund News and includes our Crane BFI Indexes, which show lower bond fund yields and positive returns in April. We excerpt from the new issue below. (Contact us if you'd like to see our Bond Fund Intelligence and BFI XLS spreadsheet, or our Bond Fund Portfolio Holdings data.)

Our lead story says, "Bond fund inflows and assets have rebounded sharply in 2019, following a brief downturn in Q4'18. Total assets of bond mutual funds plus bond ETFs are now over $5 trillion, according to Crane Data projections on ICI's monthly asset collections. While ETFs continue to grow faster than funds, they remain a mere 13.8% of the total of the two groups."

It continues, "ICI's most recent weekly 'Combined Estimated Long-Term Fund Flows and ETF Net Issuance' report, with data as of May 1, tells us, 'Bond funds had estimated inflows of $9.13 billion for the week, compared to estimated inflows of $9.98 billion during the previous week. Taxable bond funds saw estimated inflows of $6.99 billion, and municipal bond funds had estimated inflows of $2.13 billion.' Over the past 5 weeks through 5/1/19, bond funds and bond ETFs have seen inflows of $47.0 billion."

The article adds, "The Investment Company Institute's latest monthly 'Trends in Mutual Fund Investing - March 2019' shows bond fund assets increased by $85.0 billion to $4.270 trillion. Over the past 12 months through 3/31/19, bond fund assets have increased by $176.8 billion, or 4.3%. The number of bond funds declined by 12 in March to 2,159. This was up 16 from a year ago.'"

Our "Fact Book" article says, "The Investment Company Institute recently published its '2019 Investment Company Fact Book,' which contains a review on the bond fund marketplace in 2018 and a wealth of statistics on bond mutual funds. ICI's section on 'Bond Mutual Funds' says, 'Bond mutual fund net new cash flows typically are correlated with the performance of US bonds, which, in turn, is largely driven by the US interest rate environment.' Long-term interest rates fluctuated in 2018, finishing the year about 30 basis points higher than at the beginning of the year. The 10-year Treasury started 2018 at 2.40 percent and rose 65 basis points by September 30. Over the same period, the total return on bonds fell below zero." Long-term interest rates continued to increase through early November of 2018 but fell sharply late in the fourth quarter, finishing the year at 2.69 percent."

It continues, "During the first three quarters of 2018, even though long-term interest rates were rising (meaning bond prices were falling), taxable bond mutual funds received $109 billion in net inflows.... During the fourth quarter of the year, investors withdrew $112 billion, on net, from taxable bond mutual funds despite decreasing long-term interest rates.... This outflow may seem surprising, but investors may have been reacting to the abrupt flattening of the Treasury yield curve during the fourth quarter. The difference in yield between 10-year Treasury notes and 3-month Treasury bills was 1% in the early part of October, but the spread fell to 24 basis points by year-end 2018, its low point of the year."

Our Bond Fund News includes the brief "Yields Lower, Returns Jump in April." It explains, "Bond fund yields were lower for most categories except Ultra-Short, Intm. and Long-Term. The BFI Total Index returned 0.41% for 1-month and 4.18% over 12 months. The BFI 100 returned 0.41% in April and 4.75% over 1 year. Our BFI Conservative Ultra-Short Index returned 0.25% over 1 month and 2.51% over 1-year; the BFI Ultra-Short Index averaged 0.30% in April and 2.46% over 12 mos. BFI Short-Term returned 0.35% and 3.31%, and BFI Intm-Term Index <b:>`_returned 0.22% and 4.70% for 1-mo and 1-year. `BFI's Long-Term Index returned 0.20% in April and 5.39% for 1-yr; our High Yield Index returned 1.34% in April and 5.16% over 1-yr."

Another News brief, "Federated Buying PNC Bond Funds," explains, "A press release says, 'Federated Investors ... and The PNC Financial Services Group ... announced that they have reached a definitive agreement for Federated to acquire certain components of [PNC's] investment-management business. The proposed transaction includes the reorganization of PNC's family of liquidity, equity and fixed-income mutual funds into corresponding Federated mutual funds. PNC Ultra Short Bond will merge into Federated Ultrashort Bond, and PNC Tax Exempt Limited Maturity Bond will merge into PNC Tax Exempt Limited Maturity Bond."

A third News update, "MStar Writes, 'Introducing Two New Morningstar Bond Categories,' which says, "The intermediate-term bond Morningstar Category long ranked as the largest of the fixed-income categories, home to funds that invested primarily in investment-grade fixed-income debt and had durations (a measure of interest-rate sensitivity) that landed in the intermediate-term range. Effective April 30, 2019, we retired the intermediate-term bond category and introduced two new categories: intermediate core bond and intermediate core-plus bond."

A fourth News brief, "IBD Says 'Risk-On April Makes High-Yield Funds Among Best Bond Funds As Treasuries Decline,' comments, "U.S. Treasuries reversed course in April, giving back a chunk of their March gains, as investors embraced riskier assets with no sign of a recession in sight. High-yield and loan participation funds were among the best bond funds during the month."

Finally, a sidebar entitled, "Morningstar Fee Study," explains, "An article entitled, '`2018 Morningstar Fee Study Finds That Fund Prices Continue to Decline,' tells us, 'Investors paid less to own funds in 2018 than ever before. Morningstar's annual fee study of U.S. open-end mutual funds and exchange-traded funds found that the asset-weighted average expense ratio was 0.48% in 2018, a 6% decline from 2017.... Among passive funds, taxable-bond funds saw the biggest year-over-year cost decline, as the asset-weighted average fee fell 10% to 0.12% in 2018."

It explains, "This resulted largely from a spike in flows to very low-cost short- and ultrashort-term bond index funds and ETFs, reflecting resurgent investor demand for cash-like alternatives amid market turbulence. These index funds and ETFs accounted for approximately a third of flows into all funds in 2018."

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