The April issue of our Bond Fund Intelligence, which will be sent to subscribers Thursday morning, features the lead story, "No Quarter for Bond Funds in Q1'22; Pain & Outflows Spread," which reviews the worst performance of bond funds in years; and, "Bond Fund Symposium: Major Issues, Losses, ESG," which quotes from our recent ultra-short bond fund event. BFI also recaps the latest Bond Fund News and includes our Crane BFI Indexes, which show that bond fund returns plunged and yields jumped again in March. 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.) (Note: Crane Data will host a free "Money Fund Statistics Overview" webinar next Thursday, April 21 from 2-3pm Eastern, which will review assets, yields, returns, maturities, liquidity, portfolios and expense ratios, as well as Crane Data products. Click here to register, and we hope you'll join us!)
Our "No Quarter" piece reads, "While few outside the space noticed the losses and outflows early this year, `bond funds' pain splashed across the headlines in March. Bond fund assets have declined by $256.9 billion YTD, or 7.7%, YTD in '22 through 3/31, with returns falling 1.8% in March and 4.1% YTD. (See table below.)"
It quotes Barron's "The Worst Quarter in Years for Bond Fund Investors Had Few Bright Corners," which states, "There was no refuge for investors in bond funds.... Yields across the entire bond market have been rising at their fastest pace in years, and bond prices ... are falling.' Not surprisingly, investors pulled $87 billion from bond mutual funds and ETFs in the first three months of 2022, according to the Investment Company Institute, marking the biggest outflows since the first quarter of 2020. The Vanguard Total Bond fund (VBMFX) ... fell 6.5% in the quarter. Since the fund was launched in 1987, its worst year was 1994's 2.7% decline."
Our "BF Symposium" piece states, "Crane Data hosted its Bond Fund Symposium, recently in Newport Beach, Calif., which brought together ultra-short bond fund managers, issuers, dealers and investors to discuss a number of short-term fixed-income investment topics. Thanks again to those who attended and supported BFS! Attendees and subscribers may access the recordings and conference materials via our Bond Fund Symposium 2022 Download Center. (Mark your calendars for our next Bond Fund Symposium too, March 23-24, 2023, in Boston, Mass.)"
The update continues, "We quoted from the opening session, 'State of the Bond Fund Marketplace,' and from the 'Senior Portfolio Managers Perspectives' sessions in our latest Money Fund Intelligence issue, but below we also excerpt from the 'Major Issues in Fixed-Income Investing' and the 'ESG Issues in the Bond Fund Space,' sessions. (We reprint some of the 'State' comments too.)"
ICI's Antoniewicz says, "For years and years, we had bond prices rising, rates falling, strong capital gains on bond funds and very, very strong inflows. Then all of a sudden, everything turned around. We had very small capital losses last year on bond funds. Flows sort of held up.... But moving into this year, we had much deeper capital losses on bond funds and flows are turning negative."
Our first News brief, "Returns Plunge, Yields Jump, Yet Again," says, "Bond fund returns fell sharply and yields rose again in March. Our BFI Total Index dropped 1.78% over 1-month and fell 2.52% over 12 months. The BFI 100 returned -1.96% in March and -2.45% over 1-year. Our BFI Conservative Ultra-Short Index was down 0.27% for 1-month and down 0.57% for 1-year; Ultra-Shorts declined 0.55% and 0.92%, respectively. Short-Term decreased 1.34% and 2.45%, and Intm-Term fell 2.50% in March and fell 3.42% over 1-year. BFI's Long-Term Index fell 2.74% in March and 3.52% over 1-year. Our High Yield Index fell 0.73% in March but gained 0.25% over 1-year."
We also quote Barron's on "What to Buy Following an Epic Bond Rout." They state, "Many sectors are showing double-digit negative total returns this year.... The iShares 20+ Year Bond ETF (TLT) ... is down 14% this year.... Municipal bond closed-end funds are off 15%.... [M]any bond managers urge investors to be cautious and favor shorter-maturity bonds.... Another risk is that individuals who have put $3.4 trillion into bond funds and ETFs since 2009 continue to exit. Fund flows in both taxable and tax-free bond funds have been negative this year."
A third News brief is headlined, "Reuters Says, 'U.S. Bond Funds Post Outflows for 13th Week in a Row.'" They write, "U.S. investors remained net sellers of bond funds in the week to April 6 on rising prospects of rapid reductions to the Federal Reserve’s balance sheet alongside steady increases in policy rates…. U.S. investors sold bond funds of $2.24 billion, compared with net withdrawals of $3.86 billion in the previous week, Refinitiv Lipper data showed. "
Yet another News brief, "WSJ: 'Exodus From Bond Funds Is Mitigating the Stock Market's Swoon,' The article tells us, "The bad news in the bond market has been a rare boon for stocks. Investors pulled nearly $160 billion from money-market funds and $17.5 billion from bond mutual funds and exchange-traded funds in the first seven weeks of the year, according to Refinitiv Lipper. The exodus is already on pace to be the biggest in at least seven years."
Also, a BFI sidebar, "Worldwide BF Assets $13.6T," states, "Bond fund assets worldwide increased slightly in Q4'21 to $13.6 trillion, led by the four largest bond fund markets: the U.S., Luxembourg, Ireland and China. ICI's 'Worldwide Open-End Fund Assets and Flows, Fourth Quarter 2021,' says, 'Bond fund assets increased by 0.6% to $13.72 trillion in the fourth quarter.... The asset share of bond funds was 19%.... Globally, bond funds posted an inflow of $235 billion in the fourth quarter of 2021, after recording an inflow of $337 billion in Q3.'"
Finally, another sidebar, "Double Whammy on Assets," comments, "After hitting a record in November 2021, bond fund assets have now fallen for four months in a row. Bond fund assets fell $101.8 billion in March; YTD they're down $256.9 billion (through 3/31), according to Bond Fund Intelligence."
