The June issue of our Bond Fund Intelligence, which was sent to subscribers Thursday, features the lead story, "Worldwide BF Assets Drop to $13.0 Trillion, Led by U.S.," which reviews Q1 declines in the U.S. and other countries; and, "Ultra-Shorts Not So Hot at Money Fund Symposium," which quotes from Crane Data's most recent conference. BFI also recaps the latest Bond Fund News and includes our Crane BFI Indexes, which show that bond fund returns plunged in June while yields rose for the 9th straight month. 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.)
Our "Worldwide" piece reads, "Bond fund assets worldwide decreased moderately in the latest quarter to $13.0 trillion, led by the four largest bond fund markets -- the U.S., Luxembourg, Ireland and China. We review the ICI's 'Worldwide Open-End Fund Assets and Flows, First Quarter 2022' release and statistics below."
ICIs report says, "Worldwide regulated open-end fund assets decreased 4.6 percent to $67.80 trillion at the end of the first quarter of 2022.... Worldwide net cash inflow to all funds was $81 billion in the first quarter, compared with $1.1 trillion of net inflows in the fourth 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. The collection for the first quarter of 2022 contains statistics from 46 jurisdictions."
Our "Ultra-Shorts" piece states, "Crane Data's recent Money Fund Symposium conference included a segment entitled, 'Ultra-Short Bond & European MMF Update,' which featured J.P. Morgan Securities' Teresa Ho, UBS Asset Mgmt's Rob Sabatino, and Federated Hermes' Dennis Gepp. We excerpt from the bond fund-related segments below. (Note: The recordings are available in our 'Money Fund Symposium 2022 Download Center.')"
It continues, "Ho says, 'It's been a pretty ugly year in the fixed income world across the curve and pretty much across asset classes. The sharp pivot in the Fed's monetary policy really punished bond holders, particularly so out the curve.... The front end has performed better than the other parts of the curve. But relative to its historical performance, the front end in the 1-3 year space has had its worst returns since 2020, with returns approaching -2%.... We've seen negative returns dominate, and this is across all different strategies and styles -- government, conservative credit, credit and multisector. The only sector that's been unscathed so far this year are money market funds.'"
Our first News brief, "Returns Get Real Ugly; Yields Higher," says, "Bond fund returns plunged, their 5th decline in 6 months. Yields rose for the 9th month in a row in June. Our BFI Total Index fell 2.20% over 1-month and is down 8.04% over 12 months. The BFI 100 returned -2.30% in June and -8.54% over 1-year. Our BFI Conservative Ultra-Short Index was down 0.24% for 1-month and down 0.90% for 1-year; Ultra-Shorts declined 0.55% and 1.99%, respectively. Short-Term returned -1.27% and -4.80%, and Intm-Term fell -2.03% in June and is down 9.72% over 1-year. BFI's Long-Term Index fell 2.59% and -12.75%. High Yield fell 5.24% in June and 10.04% over 1-year."
A second News brief, "Morningstar Discusses, 'How the Most Widely Held Bond Funds Did in the Second Quarter.'" They write, "Investors in the most widely held bond funds saw across-the-board losses in the second quarter, as stubbornly high inflation and rising interest rates took their toll on returns.... For bond investors, that meant a second consecutive quarter of losses across the vast majority of funds, including those most widely held by investors. And at midyear, bond fund investors are facing some of the worst losses in the market's history."
We also write, "Reuters' 'U.S. Bond Funds See Weekly Inflows After Four Weeks' tells us, 'Investors were net buyers of U.S. bond funds in the week ended July 6 as rising worries over economic growth increased demand for safe-haven U.S. debt. According to Refinitiv Lipper data, U.S. bond funds attracted a net $2.72 billion in purchases, marking their first weekly inflow since June 1.'"
Yet another News brief is: "The WSJ's 'Bond ETFs Attract New Investors With Narrower Offerings' tells us, 'This wouldn't seem to be the best of times for exchange-traded funds that focus on fixed income. A resurgence of inflation not seen in 40 years has put upward pressure on interest rates, which, in turn, has sent prices of bonds and bond funds tumbling. Yet new investment in fixed-income ETFs continues apace. Why? Like their cousins for stocks, ETFs that trade in bond and credit markets have become more granular over the years.... Investors have poured nearly $500 billion into U.S.-listed bond ETFs since the end of 2019, closing June with nearly $1.2 trillion in assets under management, according to research firm CFRA. Investor demand helped lead asset managers to launch 163 new products over the same time frame.'"
A BFI sidebar, "MSRB on Muni Owners," states, "A press release entitled, 'MSRB Research Reveals Significant Shifts in Municipal Securities Ownership <i:https://www.msrb.org/News-and-Events/Press-Releases/2022/Securities-Ownership>,' explains, '`The `Municipal Securities Rulemaking Board (MSRB) examines trends in municipal securities ownership since 2004, revealing a continuous decline in individual investor direct ownership of municipal securities while ownership through funds has steadily risen. Looking at Federal Reserve data from 2004 through the first quarter of 2022, the MSRB found that ownership among banks, insurance companies, money market funds and foreign investors has also shifted.... Ownership of municipal securities has changed significantly during that time period, with ownership through funds—primarily mutual funds and exchange-traded funds (ETFs) -- taking a significant share from direct ownership as individual investor product preferences have shifted.'"
Finally, another sidebar is "BF Outflows Grow in June." It says, "Bond funds saw outflows for the 6th straight month in June. Total assets declined by $99.1 billion to $2.799 trillion last month, according to our Bond Fund Intelligence. YTD, assets are down $526.1 billion (through 6/30/22), and over 1-year they've fallen by $498.4 billion, or -15.1%."
