The September issue of our Bond Fund Intelligence, which was sent to subscribers Monday, features the stories, "Bond Funds Continue Raking in Cash; ETFs Hit $2 Trillion," which covers the recent surge in bond fund inflows; and "Vanguard F-I Head Devereux Featured by Morningstar," which excerpts from a recent interview with a global head of fixed income. BFI also recaps the latest Bond Fund News and includes our Crane BFI Indexes, which show that bond fund returns were higher while yields were lower. 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: For those attending our European Money Fund Symposium next week, Sept. 22-23, in Dublin, Ireland, safe travels and we look forward to seeing you!)
BFI's lead article states, "Bond fund inflows jumped for the 4th month in a row and bond fund assets continue to climb to record levels. Assets rose by $50.0 billion in August to $2.992 trillion (after rising $18.0 billion in July and $47.5 billion in June), according to Bond Fund Intelligence. Assets have risen $158.7 billion, or 5.6%, over 12 months. Bond ETFs rose by $32.7 billion to $1.345 trillion in August."
It continues, "ICI's 'Combined Estimated Long-Term Fund Flows and ETF Net Issuance' (9/10 data) says, 'Bond funds had estimated inflows of $13.80 billion for the week, compared to estimated inflows of $13.78 billion during the previous week. Taxable bond funds saw estimated inflows of $13.53 billion, and municipal bond funds had estimated inflows of $270 million.' Over 5 weeks, bond funds and ETFs saw inflows of $75.1B."
Our "Vanguard" article states, "Morningstar recently published a 'profile' piece titled, 'Vanguard's Sara Devereux: Why It’s a ‘Terrific Environment’ for Bond Income.' They explain, 'It's been a wild ride in the bond market this year, but Sara Devereux, Vanguard's global head of fixed income, believes investors are in a sweet spot for attractive yields. She says that with yields having risen from pre-pandemic lows, the potential total return on bonds (the interest payments plus price return) is appealing. At the same time, though the Federal Reserve is expected to begin lowering interest rates as soon as September, she believes yields will stay well above pre-pandemic levels.'"
We write, "The piece tells us, 'If the economy takes a turn for the worse, a bond rally will also bring opportunities for price appreciation that can provide ballast in a broader portfolio. But if bond prices decline, the higher yield offers a cushion against losses on fixed-income holdings. Devereux's biggest piece of advice for investors right now: 'Revisit your fixed income allocations.' Many overlooked bonds when interest rates bottomed out and yields were ultra-low. With rates more in line with their historical norms, investors who are under-allocated should pay attention.'"
Our first News brief, "Returns Jump, Yields Lower in Aug.," says, "Bond fund returns were higher in August after being mixed in July. Our BFI Total Index rose 1.01% over 1-month and rose 4.02% over 12 months. (Money funds rose 4.40% over 1-year as measured by our Crane 100 Index.) The BFI 100 increased 1.16% in August and rose 4.46% over 12 mos. Our BFI Conservative Ultra Short Index was up 0.49% over 1-month and 4.75% for 1-year; Ultra-Shorts rose 0.59% and 5.10%. Short-Term returned 0.97% and 5.42%, and Intm-Term jumped 1.35% in August and rose 3.95% over 12 mos. BFI's Long-Term Index was up 1.08% and up 2.96%. High Yield returned 1.00% in August and 6.79% over 12 months."
A second News brief, "Barron's Says, 'Bond Yields Are Falling. Where Retirees Can Still Find 5% Yields.' The article comments, 'Bond yields have edged down on expectations of a Federal Reserve rate cut next week, and they may drift lower if the economy sours. If you need income from your portfolio, it may be time to start making adjustments.... 'The free lunch is kind of coming to an end,' says Jack McIntyre, global fixed-income portfolio manager at Brandywine Global Investment Management.... While rates are coming down, investors can still find nominal yields around 5% ... in high-quality corporate bonds, says Adam Abbas, a co-manager of the Oakmark Bond fund.... Another way to invest is through a low-cost ETF such as iShares 1-5 Year Investment Grade Corporate Bond."
Our next News brief, "MarketWatch: 'Demand for Fixed Income ETFs and Bond Funds Stayed Strong over the Past Week: Barclays' states, 'Demand for bond-related funds and exchange-traded funds held up over the most recently reported period, with banks remaining net buyers amid subdued interest from foreigners, according to a team at Barclays.'"
A BFI sidebar, "Bond Investors Miss Out," tells us, "Morningstar writes on 'Why Bond Fund Investors Missed Out.' They explain, 'We recently published our annual 'Mind the Gap' study. You can get a quick synopsis of the study's key takeaways here, but one of the notable findings is that bond-fund investors once again captured a smaller share of their funds' total returns than investors did in other types of funds.''
Finally, another sidebar, "NTAM Launches F-I ETF Suites," says, "A press release titled, 'Northern Trust Launches Fixed Income ETF Suites,' states, 'Northern Trust Asset Management has launched three suites of fixed income ETFs.... The 11 new ETFs are the first funds under the new Northern Trust ETFs brand.'"
