Fixed income vehicles attracted a wave of fresh capital last week, marking the largest weekly inflow for the sector since June 2020, according to data compiled by Bank of America. The surge pushed the overall fixed income inflow streak to nine consecutive weeks.
Scope of the inflows
Investment-grade funds continued to draw money for a sixth straight week, with mid-term mandates taking the lead. Short-term and long-term investment-grade funds also recorded net inflows, and flows across the credit curve have seen consistent breadth for the fourth week in a row.
High-yield strategies extended their run, registering an eighth consecutive week of inflows. Within European-domiciled high-yield funds, global- and euro-focused products experienced stronger capital reception than U.S.-focused funds. High-yield exchange-traded funds also attracted money for a fifth straight week.
Government bond funds saw a pickup in inflows, accelerating to their strongest weekly pace in four weeks. Money-market funds returned to the inflow column for the first time in four weeks. Global emerging market debt funds posted an eighth straight week of inflows, and last week represented their largest weekly intake in six weeks.
Government vs. credit and the backdrop
Flows into government bonds continued to outpace credit-focused fund flows in the most recent week. Bank of America noted it expects this pattern to continue while Bund yields remain near 18-year highs. The bank attributed the broad-based move into fixed income to a backdrop of higher risk-free rates combined with relatively low rate volatility.
Equities remain under pressure
By contrast, equity funds posted net outflows for the eighth week in a row. Equity ETFs recorded their sixth straight week of outflows and marked the ninth week of outflows over the past eleven weeks.
Market context and implications
These fund flow patterns reflect investor preferences for yield and perceived safety in the current rate environment. The persistence of flows into government and other fixed income products suggests continued demand for income and duration, while equities are experiencing extended withdrawals.
Where the flows go from here may hinge in part on the trajectory of risk-free yields and any changes to rate volatility, factors the reporting bank highlighted when explaining the recent broad interest in debt markets.