- Join Date
- Sep 2001
U.S. Bond Funds Suffer Second-Most Redemptions Since 1992
U.S. bond funds suffered their second-worst withdrawals last week in more than
two decades after speculation about an eventual end to the Federal Reserve’s
bond purchases sent fixed-income markets lower.
Investors pulled $9.1 billion from fixed-income mutual funds and exchange-
traded funds in the week ended June 5, Denver-based Lipper said yesterday in an
e-mailed statement. That’s the second-biggest redemption for a week since the
company started tracking the data in 1992. Corporate high-yield funds saw
redemptions of $3.2 billion, Lipper said, the largest weekly withdrawal on record.
By Charles Stein – Jun 7, 2013 1:54 PM CT
(Lots of links at Bloomberg, worth viewing there…)
While retail investors have favored the perceived safety of bond funds over
equity funds since the financial crisis, money managers and analysts have been
predicting a reversal as interest rates near zero would eventually rise and send
bond prices lower. Global bond markets posted their biggest monthly losses in
nine years in May, as the more than $40 trillion of bonds in the Bank of America
Merrill Lynch Global Broad Market Index fell 1.5 percent on average.
Lipper didn’t break down the bond-fund redemptions into mutual funds and ETFs.
Individual investors typically own bonds through mutual funds, while institutions
are big buyers of ETFs.
Bill Gross’s Pimco Total Return Fund (PTTRX), the world’s largest mutual fund,
had redemptions of $1.32 billion in May, the first net withdrawals since 2011,
according to Chicago-based Morningstar Inc. The $4.9 billion ETF version of the
fund had $64.4 million in withdrawals in May and another $119 million in the
first five days of June, according to IndexUniverse, a San Francisco-based
Gross, co-chief investment officer of Pacific Investment Management Co. in
Newport Beach, California, last month predicted that the three-decade bull
market in bonds had ended in late April. He said yesterday that he’s sticking to
high-quality bonds as market risks are rising.
“Treasuries in the last few weeks have certainly been the place to be,” Gross said
during an interview on Bloomberg Television’s “Market Makers” with Erik
Schatzker and Sara Eisen. Stocks, high-yield debt, currency and emerging-
market bonds are all in “disarray,” he said.
Federal Reserve Chairman Ben S. Bernanke told Congress on May 22 that the
central bank’s policy-setting board could start scaling back its bond purchases in
its “next few meetings” if the U.S. employment outlook shows sustained
Economists polled by Bloomberg this week predicted the Fed will trim its
quantitative easing program to $65 billion a month at the Oct. 29-30 meeting of
the Federal Open Market Committee, from the current level of $85 billion.
In the most recent week, equity ETFs experienced $2.8 billion in redemptions,
while stock mutual funds attracted $500 million, Lipper reported. In the first four
months of the year, stock mutual funds gathered $92 billion as bond funds won
$96 billion, according to data from Chicago-based Morningstar Inc. (MORN)
The flight from bond funds was a global phenomenon, affecting both retail and
institutional investors, according to EPFR Global, a Cambridge, Massachusetts
company that tracks the flow of money into traditional and alternative funds
around the world.
Those bond funds saw redemptions of $12.5 billion in the week ended June 5,
EPFR reported today, the biggest weekly withdrawals since the firm began
collecting data in 2001.
Debate Over Rates
“Every year for the past four years, people have said the bond trade is over and
yet it keeps going,” Lee Spelman, head of U.S. equity client portfolio managers at
New York-based JP Morgan Asset Management, said in an interview last month.
Economists surveyed by Bloomberg expect U.S. rates to rise over the next four
Jeffrey Gundlach disagrees. The manager of the $41 billion DoubleLine Total
Return Fund (DBLTX), said this week that while rates may move higher in the
near-term, he expects the yield on the 10-year U.S. Treasury note to drop to 1.7
percent by the end of the year. It closed yesterday at 2.08 percent, according to
data compiled by Bloomberg.
“It’s a horrible time to be exiting bonds,” Gundlach said.
One type of fixed-income investment that has remained popular is the
adjustable-rate loan. Investors added $873 million in the week to funds that buy
the loans, Lipper reported, the 51st straight week of deposits. Rates on the loans
float higher as interest rates climb.
To contact the reporter on this story: Charles Stein in Boston at
To contact the editor responsible for this story: Christian Baumgaertel at
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