The August issue of our Bond Fund Intelligence, which were sent to subscribers Friday morning, features the lead story, "ICI Looks at Core Bond Funds & Market Impact in March '20," which reviews a recently published "Viewpoint" about 3/20; and, "Touchstone Ultra Short ETF; Weston, Mayfield Comment," our most recent "profile" with Fort Washington's Scott Weston and Laura Mayfield. BFI also recaps the latest Bond Fund News and includes our Crane BFI Indexes, which show that bond fund returns rebounded strongly in July while yields rose for the 10th 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 lead article, "ICI recently posted a 'Viewpoint' entitled, 'Core Bond Mutual Funds Had Little Impact on the Investment Grade Corporate Bond Market.' They write, Core bond mutual funds' activities during March 2020 had little impact on the investment grade corporate bond market. According to an ICI study, the timing and small size of core bond mutual funds' daily net sales of investment grade corporate bonds is inconsistent with some policymakers' narrative that they substantially amplified market stresses. In addition, core bond mutual funds' net sales generally accounted for a relatively small share of daily trading volume. And, even when their share of daily trading rose to a peak of 20 percent on March 12, 2020, bid-ask spreads on investment grade corporate bonds were unchanged."
ICI's piece explains, "As a follow-up to a previous post, we examine daily net purchases and sales of investment grade bonds by 'core bond' mutual funds during March 2020 using data from an ICI survey. This analysis should help allay concerns policymakers may have about whether these funds' sales pressured the investment grade corporate bond market on any specific day in March 2020."
Our "Touchstone" profile states, "This month, BFI interviews Fort Washington Investment Advisors' Managing Director & Senior Portfolio Manager Scott Weston and Senior Portfolio Manager Laura Mayfield. Fort Washington is the investment subsidiary for Western & Southern Financial Group, and manages a number of funds for Touchstone Investments. Touchstone recently announced the launch of a new Touchstone Ultra Short Income ETF. Our Q&A follows."
BFI says, "Give us some history." Weston responds, "Fort Washington's Ultra-Short Duration composite was incepted in 1995. So, we've been in this ultra-short space for about 27 years. I started at Fort Washington in 1999 and in 2001 Brent Miller and I assumed management of the ultra-short composite and began migrating it from a credit-only focus to a multisector focus with an emphasis on structured products. We had a strong conviction that the ultra-short duration markets were inefficient and structured securities provided a consistent source of alpha in this part of the curve. We believe this value proposition holds true."
Our first News brief, "Returns Rebound; Yields Higher," says, "Bond fund returns rebounded sharply in July after falling 5 of the previous 6 months. Yields jumped for the 10th month in a row. Our BFI Total Index rose 2.24% over 1-month but fell 6.57% over 12 months. The BFI 100 gained 2.57% in July but lost 6.91% over 1-year. Our BFI Conservative Ultra-Short Index was up 0.21% over 1-month but down 0.69% for 1-year; Ultra-Shorts rose 0.35% and fell -1.69%. Short-Term returned 1.06% and -4.00%, and Intm-Term rose 2.49% in July but is down 8.31% over 1-year. BFI's Long-Term Index rose 2.97% and -11.35%. High Yield rose 4.58% in July and -6.17% over 1-year."
A second News brief, "Bloomberg Says, 'Vanguard Steals BlackRock Crown for World's Biggest Bond ETF.' They write, 'The Vanguard Total Bond Market ETF (BND), with assets of roughly $83.8 billion, has surpassed the $83.2 billion iShares Core US Aggregate Bond ETF (AGG) to become the world's biggest bond ETF, Bloomberg data show.'"
Another brief, "The Wall Street Journal Writes, 'Pimco Notches Nearly $30 Billion in Outflows in Second Quarter.' They explain, 'Clients of bond giant Pimco pulled out the equivalent of nearly $30 billion in the second quarter, a sign of investor flight amid interest-rate hikes. Parent company German insurer Allianz said ... that the outflows were in line with overarching market trends. Pimco is one of the world's largest fixed-income investors with more than $1 trillion in assets under management. Pimco's outflows were significantly higher than expected, Citigroup analysts said Friday.'"
A third News brief, "U.S. Bond Funds Gain Biggest Weekly Inflow in 11-Months Says Reuters," reports, "U.S. bond funds recorded their biggest weekly purchase in eleven months in the week to Aug. 3 on expectations that slowing growth would prompt the Federal Reserve to slow down the pace of its rate hikes."
A BFI sidebar, "Fink: Bond ETFs Turn 20," states, "Larry Fink comments on BlackRock's latest earnings call <i:https://news.alphastreet.com/blackrock-inc-blk-q2-2022-earnings-call-transcript/>`_, 'Our iShares business ... has allowed us to deliver new solutions for clients and growth for the firm. Twenty years ago, in December 2002, iShares launched the first U.S.-domiciled bond ETF, an innovation that went on to break down many barriers in fixed-income investing. Today, both individual investors and large institutions are using bond ETFs for convenient, efficient exposures to thousands of global bonds and to make quick specialized recalibrations to their portfolio. In other words, they are using bond ETFs for active investing."
Finally, another sidebar, "BF Assets Rise in July," says, "Bond fund assets increased in July, though they saw outflows for the 8th straight month. Total assets rose by $37.0 billion to $2.836 trillion last month, according to our Bond Fund Intelligence <b:>`_. YTD, assets are down $489.1 billion (through 7/31/22), and over 1-year they've fallen by $498.2 billion, or -14.9%."
