The April issue of our Bond Fund Intelligence, which was sent to subscribers Wednesday morning, features the lead story, "Bond Fund Assets Plunge as Virus Shock Causes Chaos," which covers the huge outflows in bond funds in March, and, "Worldwide Bond Fund Assets Rise to $11.8 Tril; US Jumps," which looks at the ICI's latest bond fund totals outside the U.S. BFI also recaps the latest Bond Fund News and includes our Crane BFI Indexes, which show that bond fund yields jumped and returns plunged in March. 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 "Bond Fund Assets Plunge" article says, "After 14 straight months of outsized inflows and 4 years of strong asset gains, bond funds assets plummeted in March as the coronavirus wreaked havoc on financial markets. Bond fund assets tracked by BFI plunged by $280.1 billion to $2.721 trillion, while bond ETF assets fell by another $30.1 billion to $680.2 billion. Intermediate and Long-Term BFs showed the biggest declines, followed by Municipal and High-Yield BFs."
BFI continues, "While outflows have slowed and returns have stabilized month-to-date in April, some serious damage was done to bond fund returns. (See our lead News brief.) Returns for bond funds overall are now below returns for money market funds in the 1-year period through March 31, 2020. Our BFI Total Index returned 1.43% on average vs. a return of 1.63% for our Crane Money Fund Average."
The piece also quotes the FT's "Asset managers rocked by record bond fund outflows," which says, "Mutual funds and exchange traded funds that invest in bonds suffered $109bn in outflows for the week ending Wednesday, a new record that also included the highest-ever weekly outflows for specialist junk bond and investment-grade corporate bond funds.... The exodus even from investment-grade corporate debt and sovereign bond funds underscores the extent of a rush toward cash that has been blamed for some of the biggest market moves of recent days."
Our Worldwide piece reads, "Bond fund assets worldwide increased slightly in the latest quarter to $11.8 trillion. The U.S. saw assets jump while Ireland and Luxembourg also saw noticeable increases. We review the ICI's 'Worldwide Open-End Fund Assets and Flows, Fourth Quarter 2019' release and statistics below."
ICI's report says, "Worldwide regulated open-end fund assets increased 6.4% to $54.88 trillion at the end of the fourth quarter of 2019, excluding funds of funds. Worldwide net cash inflow to all funds was $836 billion in the fourth quarter, compared with $675 billion of net inflows in the third quarter.... The Investment Company Institute compiles worldwide open-end fund statistics on behalf of the International Investment Funds Association, the organization of national fund associations."
Our Bond Fund News includes the brief, "Yields Jump, Returns Plunge in March," which tells us, "Bond fund yields jumped and returns plunged last month. Our BFI Total Index returned -4.43% over 1-month and 1.44% over 12 months. The BFI 100 lost 3.82% in March but rose 2.63% over 1 year. Our BFI Conservative Ultra-Short Index returned -1.42% over 1-mo and 0.93% over 1-yr; Ultra-Shorts averaged -2.95% in March and -0.33 over 12 mos. Short-Term returned -3.27% and 0.88%, and Intm-Term lost 2.93% last month but rose 4.88% over 1-year. BFI’s Long-Term Index returned -3.72% in March and 7.04% for 1 -yr; our High Yield Index fell 10.90% in March and is down 6.84% over 1-year."
In another News brief, we quote the Barron's piece, "Most Bond Funds Have Been Beaten Up. It's Time for a Gut Check." It explains, "[W]hile investors often talk about bonds in broad terms, the past several weeks have underscored the fact that the global bond market is anything but homogenous. Of the 19 taxable bond fund categories tracked by Morningstar, all but four -- short-, intermediate-, and long-term U.S. Treasuries, plus intermediate core -- have lost money this year. So what's a bond investor to do now? For most, the best advice is probably to 'shelter in place.'"
A third News update covers the Wall Street Journal article, "Bond Investors Might Need to 'Shorten Up.'" They tell us, "When things get rough in the stock market, many investors turn to bonds to cushion the blow. So what happens when bonds get hammered, too, as they have in the latest turmoil in the financial markets? What should bond investors do now? Some advisers say to stick to short-duration bonds. Others focus on credit quality. And some say to be careful but keep an eye out for opportunities to catch an upswing.... Many investors have already moved into so called ultrashort bond exchange-traded funds, which provide exposure to bonds with durations under two years. Investors poured billions into ultrashort ETFs in March. SPDR Bloomberg Barclays 1-3 Month T-Bill ETF (BIL), for example, had $8.7 billion of inflows from investors in March, and iShares Short Treasury Bond ETF (SHV) saw $3.171 billion of inflows, according to data from CFRA Research."
Finally, BFI also features a sidebar that covers "ICI's blog, "ETFs Are Passing the Covid-19 Crisis Test." The piece explains, "Financial markets have continued to churn since our previous post, which examined mutual fund investors' initial reactions to the COVID-19 crisis, with the S&P 500 index and yield on the 10-year Treasury bond gyrating wildly. How have exchange-traded funds (ETFs) weathered the intensifying financial market fallout from the pandemic? In short, even with volatile prices and widening bid-ask spreads in stock and bond markets, trading of ETF shares has been orderly and has contributed to price discovery in the first weeks of March. In addition, net ETF share creations and redemptions, although varying by asset class, have been modest."
