Sunday, July 21, 2013

Diverging fund flows are reflected in fixed income performance

Capital is returning to certain fixed income sectors. Fund flows are quite uneven however, with the corporate sector remaining investors' favorite. In particular, high yield bonds have recouped a great deal of the recent outflows.

Source: Goldman Sachs

In contrast, mumi bonds have seen almost no new net inflows. The little problem in Detroit is not helping the situation (see story) and the SEC going after the city of Miami (see story) has made the sector look quite unappealing.

Source: Goldman Sachs

Outside of treasuries, fixed income performance these days is extremely sensitive to fund flows. And the returns over the past month (June 20th - July 19th) fully reflect these dynamics in mutual funds and ETFs.
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