US bond funds reported net inflows outpacing those for equities in 2021 YTD. Bond mutual funds and ETFs accumulated $372bn in inflows this year as of June 23 as compared to equities, which have seen $160bn in inflows. FT notes that this indicates a surprise compared to predictions earlier this year that inflation fears would detract the appeal of fixed income instruments. Bond funds are forecasted to reach record inflows, eclipsing the $446bn in 2020 and $459bn in 2019. The attraction to bond funds can be attributed to the concerns about rich stock valuations and an ageing population’s necessity for income. While overall inflows into bond funds have increased, it is worth noting that bond ETFs and funds that protect against inflation have also seen a rapid increase in inflows.
“The cumulative flow to bond funds lines up nicely with the percentage of the population over 65 years”, said Shelly Antoniewicz, ICI senior director of financial and industry research. The preferences for fixed-income securities came when equities outperform bonds and US interest rates reached higher levels compared to Europe or Japan, which contributed to the “powerful driver of foreign buying demand for US fixed income”, according to Erin Browne, portfolio manager of multi-asset strategies at Pimco.
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