The September issue of our Bond Fund Intelligence, which was sent to subscribers Thursday morning, features the lead story, "Bond Funds After Dead-Cat Bounce: Carnage Continues," which reviews the resumption of bond fund losses and, "EFAMA Fact Book Reviews European Bond Funds in '21," which reviews statistics on bond funds in Europe. BFI also recaps the latest Bond Fund News and includes our Crane BFI Indexes, which show that bond fund returns plunged again in August while yields rose for the 11th 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 "Dead-Cat Bounce" article says, "The year 2022 has been brutal to bond funds. While they got some respite in July, bond funds were hammered again in August. Both returns and assets fell sharply last month, with our Crane 100 BFI Index falling 1.99% (down 8.75% over 1-year) and assets falling by $70.5 billion."
The piece cites, "No Escape From Biggest Bond Loss in Decades as Fed Keeps Hiking," a recent piece by Bloomberg. They tell us, "Investors who might be looking for the world's biggest bond market to rally back soon from its worst losses in decades appear doomed to disappointment."
It also quotes from Morningstar's "Are Bond Investors Making a Mistake by Bailing Out?" They write, "There's no question that 2022 has been a horrible year for bonds. As the Federal Reserve has hiked interest rates to try to get inflation under control, bonds have suffered some of their worst losses in decades. In the first six months of 2022, for example, the Bloomberg U.S. Aggregate Bond Index dropped 10.35% -- its worst showing in over four decades."
Our "EFAMA" update states, "A press release entitled, 'EFAMA publishes 2022 Industry Fact Book,' tells us, 'The European Fund and Asset Management Association (EFAMA) has released its 2022 Industry Fact Book. The 2022 Fact Book provides an in-depth analysis of trends in the European fund industry, with an emphasis on what happened in 2021. It also includes an extensive overview of the regulatory developments across 28 European countries and a wealth of data.'"
It quotes EFAMA Director General Tanguy van de Werve, "Beyond providing in-depth analysis of recent trends in the European investment fund industry, this year's ... Fact Book analyses several issues highly relevant for our industry, including the current limitations of the Sustainable Financial Disclosure Regulation (SFDR)."
Our first News brief, "Returns Crushed; Yields Jump Again," says, "Bond fund returns crashed again in August after a July rebound. Yields jumped for the 11th month in a row. Our BFI Total Index fell 1.58% over 1-month and fell 8.00% over 12 months. The BFI 100 lost 1.99% in August and lost 8.75% over 1-year. Our BFI Conservative Ultra-Short Index was up 0.15% over 1-month but down 0.55% for 1-year; Ultra-Shorts rose 0.14% but fell 1.57%. Short-Term returned –0.76% and -4.76%, and Intm-Term fell 2.35% in August and is down 10.39% over 1-year. BFI's Long-Term Index fell 2.85% and -13.74%. High Yield fell 1.31% in August and 7.79% over 1-year."
A second News brief, "Bloomberg's 'Bond Funds Ready to 'Load Up the Boat' at Higher Treasury Yields,' says, 'After months of heightened market volatility that savaged the performance of bond funds, investors are focused on salvation. With Federal Reserve officials beating the drum on their commitment to bringing down the highest inflation in decades, bond managers are relishing the prospect of another jump in Treasury yields that might allow them to get back in and put some of their billions of dollars in funds to work at higher rates. And they are particularly honed in on longer-dated Treasuries.'"
Another brief, "Reuters Writes, 'U.S. Bond Funds Record Biggest Weekly Outflow in Eight Weeks..' They say, 'Investors dumped U.S. bond funds in the week to Aug 24 as they waited to hear a speech by Federal Reserve Chair Jerome Powell later on Friday which will be scrutinised for clues on the pace of forthcoming interest rate hikes.'"
A BFI sidebar on Morningstar's "`3 Short-Term Bond Funds to Calm Interest-Rate Jitters," explains, "If you are worried about bonds and stocks, where do you hide? Short-term bond funds are not a bad place. Interest-rate risk is measured by duration, and the funds with the shortest duration are ultrashort bond funds followed by short-term bond funds. These funds generally have very small losses when interest rates rise. That safety doesn't come free, though. If inflation is 6%, and your short-term bond fund yields 2%, you are losing money in real terms."
Finally, another sidebar, "BF Assets Fall in August," says, "Bond fund assets plunged in August after recovering a bit in July; assets have fallen hard in 7 of the 8 months of 2022. Total assets fell by $70.5 billion to $2.756 trillion last month, according to BFI. YTD, assets are down $559.6 billion (through 8/31/22), and over 1-year they're down $581.6 billion, or -17.4%."
