A record amount of money poured out of exchange-traded and mutual bond funds in June, according to a fresh report by TrimTabs, nearly double the amount pulled out of bond funds at the height of the financial crisis in October 2008.
Investor fears over the scaling back of the U.S. Federal Reserve’s bond purchasing program has seen the yield on 10-year Treasurys rise sharply to 2.5 percent as $80 billion left bond funds in June, according to the research.
“The herd is scrambling for the exit this month as bond yields back up across the board and central bankers hint that they might provide less monetary stimulus in the future,” TrimTabs CEO David Santschi said in a research note on Sunday. “We estimate that bond mutual funds have lost $70.8 billion in June through Thursday, June 27, while bond exchange-traded funds have lost $9.0 billion.“
The rush out of bonds could be about to get even worse, according to the research firm, which says that more bond investors could take flight after receiving their quarterly statements in the coming weeks, noticing that their “safe” bond funds are delivering losses instead of gains.
The global sell-off in bonds began on May 22, after the minutes of the Fed’s policy meeting signaled that its bond-buying program—which has suppressed yields and boosted stocks—could soon be pared back. Fed Chairman Ben Bernanke echoed that view at a press meeting last Wednesday, suggesting that asset purchases could be scaled back later this year if economic data continued to show improvement.
TrimTabs call the liquidation “unprecedented” after indicating last Monday that bond outflows had already reached records with a figure of $47.2 billion. In just one extra week that number has risen to $79.8 billion which it says is reversing 73 percent of the $109.6 billion inflows seen earlier this year.
Full article: ‘Unprecedented’ $80 Billion Pulled From Bond Funds (CNBC)