July 3rd 2012
- Investors Put $19.9 Billion Net (deposits minus withdrawals) Into Bond Mutual Funds
- Investors Redeemed $3.0 Billion Net Stock and Mixed Asset Mutual Funds for the first time since Dec 2011.
- $18 Billion In Net Funds Moved Into Stock and Bond Funds In April Compared to -$0.8 Billion in April
What could explain this data?
In May, the Dow Jones Industrial Average snapped its seven-month long winning streak, losing 6.21% for the month and posting one of its worst monthly returns in two years. Both the S&P 500 and the NASDAQ Composite lost more than 6 percent on an average.
In May, the PIMCO Total Return Fund (the largest bond fund) had a nice gain of 0.85% (net of fees). The previous month the fund gained a healthy 1.46%. Both April and May were better months for bond returns. The stock market’s pullback did not appear to scare investors, however, the bond market strength attracted new money.
What type of bond funds are investors moving money into in May?
- Taxable bonds funds gained $18.0 Billion while non-taxable gained only $3.0 billion.
- Long Term bond funds gained $15.3 Billion while intermediate and short-term bond funds gained $4.6 Billion.
- Corporate debt BBB – rated funds attracted the most money of any category at $7.9 Billion.
Overall, flow of funds into bond funds mirrored the previous money. Investors are trying to balance their twin desires for yield and safety by investing in the lowest rated, investment grade debt.