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Core Bond Funds See 21 Straight Weeks of Inflows

Published 04/01/2024, 02:48 AM
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by Jack Fischer

During LSEG Lipper’s fund-flows week that ended March 27, 2024, investors were overall net redeemers of fund assets (including both conventional funds and ETFs) for the second straight week, removing a net $7.5 billion.

Taxable bond funds (+$3.1 billion, +0.57%), equity funds (+$2.0 billion, +0.69%), and tax-exempt bond funds (+$447 million, -0.06%) attracted weekly net new capital.

Money market funds (-$11.8 billion, +0.10%), alternative investments funds (-$485 million, +0.31%), commodities funds (-$435 million, +0.85%), and mixed-assets funds (-$350 million, +0.65 %) reported outflows over the week.

Money market funds reported outflows in seven of the last 11 weeks.

Spot Bitcoin ETFs reported net inflows of $180 million, marking the eleventh straight weekly inflow since these launched. The group realized net inflows despite Grayscale Bitcoin Trust (BTC) (NYSE:GBTC) suffering $1.5 billion in weekly outflows.

Index Performance

At the close of LSEG Lipper’s fund-flows week, U.S. broad-based equity indices reported mostly positive returns—the DJIA (+0.63%), Nasdaq (+0.18%), Russell 2000 (+1.90%), and S&P 500 (+0.46%) were in the black.

The Bloomberg Municipal Bond Total Return Index (-0.19%) fell while the Bloomberg U.S. Aggregate Bond Total Return Index (+0.60%) rose over the week.

Overseas indices realized mostly positive returns—DAX (+2.25%), FTSE 100 (+1.86%), Nikkei 225 (+2.09%), and S&P/TSX Composite (+0.10%) appreciated as the Shanghai Composite (-3.20%) posted weekly losses.

Rates/Yields

Both the 2-year (-1.06%) and 10-year (-2.08%) Treasury yields fell over the course of the week.

According to Freddie Mac, the 30-year fixed-rate average (FRM) decreased for the third time in the last five weeks—the weekly average is currently at 6.79%. The US Dollar Index (DXY, +0.49%) increased, while the VIX (-2.03%) fell over the course of the week.

The CME FedWatch Tool currently has the likelihood of the Federal Reserve cutting interest rates by 25 basis points (bps) at 4.2%. This tool forecasted an 18.1% possibility of a 25-bps cut one month ago. The next meeting is scheduled for May 1, 2024.

Exchange-Traded Equity Funds

Exchange-traded equity funds recorded $11.5 billion in weekly net inflows, marking 21 weeks of inflows over the last 25. The macro-group posted a 0.74% gain on the week, its eighth straight plus-side return.

Large-cap ETFs (+$6.5 billion), small-cap ETFs (+$1.7 billion), and sector equity ETFs (+1.4 billion) attracted the top inflows among the equity ETF subgroups. Large-cap ETFs observed their eighth weekly inflow over the past 10 weeks.

Developed global markets ETFs (-$22 million) suffered the only weekly outflow under equity ETFs. Developed global markets ETFs have seen three weeks of outflows over the past five.

Over the past fund-flows week, the two top equity ETF flow attractors were iShares Core S&P 500 ETF (NYSE:IVV) (IVV, +$10.7 billion) and iShares Russell 2000 ETF (NYSE:IWM) (IWM, +$824 million).

Meanwhile, the two bottom equity ETFs in terms of weekly outflows were SPDR® S&P 500® ETF Trust (ASX:SPY) (SPY, -$5.5 billion) and ProShares UltraPro QQQ (NASDAQ:TQQQ) (TQQQ, -$992 million).

Exchange-Traded Fixed Income Funds

Exchange-traded taxable fixed-income funds observed a $3.2 billion weekly outflow—the macro-group’s thirteenth inflow over the prior 14 weeks. Fixed-income ETFs reported a gain of 0.74% on average, their fourth plus-side return in five weeks.

Short/intermediate investment-grade ETFs (+$1.5 billion), government & Treasury fixed income ETFs (+$1.2 billion), and high yield funds (+$799 million) were the top subgroups under taxable bond ETFs to observe inflows. Short/intermediate investment-grade ETFs realized their largest weekly inflow on the year as they observe seven inflows over the last eight weeks.

Short/intermediate government & Treasury ETFs (-$761 million) and emerging market debt ETFs (-$63 million) were the only subgroups to post net outflows. Short/intermediate government & Treasury ETFs suffered outflows in seven of the last 10 weeks.

Municipal bond ETFs reported a $487 million inflow over the week, marking the group’s fifth weekly inflow in six.

iShares Core U.S. Aggregate Bond ETF (NYSE:AGG) (AGG, +$958 million) and iShares iBoxx $ High Yield Corporate Bond ETF (NYSE:HYG) (HYG, +$899 million) attracted the largest amounts of weekly net new money for taxable fixed-income ETFs.

On the other hand, iShares iBoxx $ Investment Grade Corporate Bond ETF (NYSE:LQD) (LQD, -$1.8 billion) and Grayscale Bitcoin Trust (GBTC, -$1.5 billion) suffered the largest weekly outflows under all taxable fixed-income ETFs.

Conventional Equity Funds

Conventional equity funds (ex-ETFs) witnessed weekly outflows (-$9.5 billion) for the one-hundred-and-eleventh straight week. Conventional equity funds posted a weekly return of positive 0.63%, the eighth straight week of gains.

Multi-cap funds (-$2.9 billion), developed international markets funds (-$1.8 billion), and large-cap funds (-$1.6 billion) were the top conventional equity fund subgroups to realize weekly outflows. Multi-cap conventional funds have only seen one week of inflows in the last 31 as they post their largest weekly outflow on the year.

No conventional mutual fund subgroup posted weekly net inflows.

Conventional Fixed Income Funds

Conventional taxable-fixed income funds realized a weekly outflow of $98 million—marking their first weekly outflow in 13 weeks. The macro-group logged a positive 0.46% on average—their first plus-side weekly return in three.

Short/intermediate investment-grade funds (+$405 million) and general domestic taxable fixed income funds (+$168 million) were the only subgroups to post inflows on the week. Short/intermediate investment-grade mutual funds have observed 13 consecutive weekly inflows.

High yield funds (-$195 million), short/intermediate Government & Treasury funds (-$192 million), and alternative bond funds (-$101 million) were the top taxable fixed-income mutual fund subgroups to post weekly net outflows.

Municipal bond conventional funds (ex-ETFs) returned a negative 0.06% over the fund-flows week, giving the subgroup back-to-back weeks of losses. The subgroup experienced a $752 million outflow, marking the first week of outflows over the trailing four weeks.

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