Funds that invest in high-quality bonds link 11 weeks of inflows

Despite the unfortunate month of October that fixed income has experienced, Bond investment funds, and particularly those that invest in the best quality debt, have continued to raise money. According to data published this Monday by BofA, last week was the eleventh consecutive week of money inflows into investment grade debt funds. This bank’s analysts highlight that the vehicles that are positioned in high-quality debt “have only registered net outflows for three weeks in all of 2024, and for very modest volumes”, which highlights “the strong demand for credit.” Last week, these products raised 3.343 million dollars (about 3,060 million euros), and in the first ten months of 2024, almost 140,000 million dollars (in euros, about 128,000 million). All this data refers to funds domiciled in Europe. Oliver Eichmann (DWS): “In fixed income, there is now no single sector that we should avoid for macro reasons.”

The rate cuts initiated by central banks on both sides of the Atlantic boost the price of bonds, which in recent months have therefore experienced a certain rally from which fixed income portfolios have benefited. However, The recently ended month of October has been very complicated for this asset: The Bloomberg Global Aggregate index (which reflects the behavior, by price, of a basket of global debt) fell 3.4%. It has been its worst month since September 2022. The main reason for this decline has been disappointment over the slowdown in the rate of rate cuts: the market has gone from discounting, in September, cuts of 75 basis points in the US until the end of the year, to now forecasting only one, for 25 points; and in Europe, from anticipating cuts of between 50 and 75 points, to predicting only one of 25 points.

Despite this, as BofA analysts explain: “In a scenario of strong expectations that the European Central Bank will reduce deposit rates well below 200 basis points in 2025, we see that the search for high-quality bonds persists. quality. IG Fund Flows [grado de inversión] have been particularly strong so far this yearregardless of movements in credit market spreads. We see no change in the latter part of 2024 as a backdrop of lower rates risk free will continue to incentivize fixed income investors to turn to investment grade corporate credit.” Against a backdrop of increased risks that the economy could slow next year, “and should downside risks to tariffs materialize commercial bonds”, the bank’s experts consider that investment grade corporate bonds “are perceived as a relatively safe haven by investors.” At the same time, they believe that flows to the high yield (high-yield debt, with a higher risk of default) will slow down due to those macroeconomic headwinds. What to do with the US bond, halfway between its best and worst moment of the year.

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