The July issue of our Bond Fund Intelligence, which was sent to subscribers Thursday morning, features the lead story, "Worldwide Bond Fund Assets Fall in Q1'21; US Only Gainer," which reviews assets in the largest bond fund markets overseas; and "John Hancock I.M. Core Team Focuses on Inflation," which quotes from a piece from Hancock's U.S. Core and Core Plus Fixed Income Team. BFI also recaps the latest Bond Fund News and includes our Crane BFI Indexes, which show that bond fund returns jumped again in June while yields were mixed. We excerpt from the new issue below. (Note: Please join us next week for our "Money Fund Wisdom Product Training" webinar, which will take place Tuesday, July 20 from 2-3pm EDT. We will give an overview and training on Crane Data products, and unveil the new version of our Money Fund Wisdom database query system.)

BFI's "Worldwide" piece reads, "Bond fund assets worldwide fell in the latest quarter after hitting a record $13.1 trillion the previous quarter. The U.S. showed gains, but Luxembourg, Germany and Brazil showed large declines. We review the ICI's 'Worldwide Open-End Fund Assets and Flows, First Quarter 2021 release and statistics below."

It continues, "Worldwide regulated open-end fund assets increased 2.5% to $64.63 trillion at the end of the first quarter of 2021.... The Investment Company Institute compiles worldwide regulated open-end fund statistics on behalf of the International Investment Funds Association (IIFA), the organization of national fund associations.... Globally, bond funds posted an inflow of $317 billion in the first quarter of 2021, after recording an inflow of $326 billion in the fourth quarter."

The Inflation article explains, "John Hancock Investment Management's Howard Greene, Jeffrey Given and Pranay Sonalkar, Co-Heads and PMs on the U.S. Core and Core Plus Fixed Income Team, posted a brief entitled, 'Rising inflation is no reason for investors to head for the sidelines.' They write, 'For the past few months, amid a wave of new government spending initiatives, a large part of the conversation among economists has been about whether inflation would become a bigger issue in the months ahead. After the most recent data from April, the conversation is no longer if inflation returns, but rather how bad it gets and what that could mean for investors.'"

The Core team tells us, "For many investors in the United States today -- and anyone under the age of 40 -- inflation feels like something of a relic: a 20th century problem that's been essentially eliminated. While that may be an attractive idea, the reality is that inflation always has the potential to return under the right combination of conditions -- and if there were ever a time to expect an increase, now is probably it."

A News brief, "Returns Still Rising, Yields Flat in June," says, "Bond fund returns rose and yields were mixed again last month. Our BFI Total Index rose 0.43% in 1-month and 4.45% in 12 mos. The BFI 100 rose 0.56% in June and 4.06% over 1 year. Our BFI Conservative Ultra-Short Index was up 0.00% over 1-mo and 0.65% over 1-yr; Ultra-Shorts averaged -0.02% in June and 1.59% over 12 mos. Short-Term decreased 0.05% and rose 3.06%, and Intm-Term rose 0.54% in June and 2.80% over 1-year. BFI's Long-Term Index rose 1.29% in June and 2.68% over 1-year. Our High Yield Index jumped 0.98% in June and 13.14% over 1-year."

Another News brief quotes the article, "Investors Are Still Pouring Money into Bond Funds,' written by ETF Trends. They write, "It's a good time to be a bond fund as investor capital has been pouring into the debt markets despite lingering inflation concerns, which can erode the income derived by bond yields over time. Nonetheless, that's not stopping investors from heading into bond funds. It's a move that some market analysts are unable to comprehend.... As credit markets start to improve, one option to consider is corporate bonds. Fixed income investors can snag this exposure with the Vanguard Total Corporate Bond ETF ETF Shares (VTC)."

A third News update covers the FT piece, "Bond Contrarians Vindicated by US Treasury Yield Plunge." They write, "Bond fund managers who bucked a market consensus earlier this year that long-term interest rates and inflation were headed sharply higher have been rewarded with outsize performance during the market switchback of the past few weeks. Star managers including Scott Minerd at Guggenheim Partners and Stephen Liberatore of Nuveen are riding high in industry league tables, after Treasury yields plunged as low as 1.25% this week, compared with a peak above 1.7% at the end of March."

Finally, a sidebar discusses a new ICI "Viewpoint," "IRA Investors Are Concentrated in Lower-Cost Mutual Funds." It shows that of the $12.2 trillion in IRAs, 45% is in mutual funds and 17% of that total is in bond funds. Thus, bond funds in IRAs total $935 billion. They write, "IRA bond mutual fund assets ... were 17% of IRA mutual fund assets at year-end 2020. Average expense ratios for bond mutual funds held by IRA investors have decreased sharply over the past five years and are down 54% from their level in 2000. The average expense ratio paid by bond mutual fund investors in IRAs fell to 0.39% in 2020, down from 0.41% in 2019 and 0.85% in 2000."

Contact us if you'd like to see our latest Bond Fund Intelligence and BFI XLS spreadsheet, or our Bond Fund Portfolio Holdings data. Also, mark your calendars for next year's Bond Fund Symposium, which is scheduled for March 28-29, 2022, in Newport Beach, Calif.

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