Green Asia

Global bond funds post massive weekly outflows on rate hike concerns

Global bond funds faced huge outflows in the week to October 4, driven by concerns over sustained high interest rates because of elevated inflation levels and a robust U.S. economy.

U.S. job openings unexpectedly increased in August, pointing to a still-tight labour market that could compel the Federal Reserve to raise interest rates next month.

Investors withdrew a net $8.47 billion from global bond funds in their biggest weekly net selling since Dec. 12, 2022, LSEG data showed.

Intense selling by investors pushed yields on the benchmark 10-year US Treasury bonds, which move inversely to prices, to a fresh 16-year high of 4.884 per cent this week.

The U.S. and European bond funds registered net outflows of $6.34 billion and $4.42 billion, respectively, but Asian funds still received inflows of about $675 million.

Notably, riskier global high-yield funds had $3.17 billion in outflows for the week, following the previous week’s net sell-off of about $3 billion. Additionally, investors withdrew about $1 billion from loan participation funds.

On the other hand, investors channelled investments into the safety of government bond funds, which attracted $1.04 billion during the week.

Safer money market funds also lured a massive $45.5 billion in the week. However riskier global equity funds saw net disposals of $2.5 billion for the third successive weekly outflow.

The healthcare, consumer staples, and consumer discretionary sector funds saw net withdrawals of $794 million, $642 million, and $507 million, respectively.

In the commodities sector, the selling streak extended to an 11th week, with net withdrawals of about $810 million. That included $78 million withdrawn from energy funds, while precious metal funds had a net outflow of $415 million for a 19th consecutive week of outflows.

Data covering 28,646 emerging market funds showed that bond funds experienced $1.74 billion in outflows, for a 10th consecutive week of net selling. Additionally, investors sold $1.28 billion in equity funds.

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