Dewi John’s Post

𝗖𝗮𝘀𝗵 𝗶𝘀 𝗞𝗶𝗻𝗴, 𝗮𝘀 𝗘𝗾𝘂𝗶𝘁𝗶𝗲𝘀 𝗮𝗻𝗱 𝗕𝗼𝗻𝗱𝘀 𝗦𝗲𝗹𝗹 𝗢𝗳𝗳 𝗶𝗻 𝗝𝘂𝗻𝗲 Despite moderating, if still sticky, inflation and positive, if weak, GDP growth through most of the developed world, we’ve seen a dash to cash in June. Over H1 2024, UK funds took £5.27bn (£5.53bn ex MMFs). Bond funds were the main beneficiaries, netting £7.8bn over H1. The only other asset class to be in the black was equity, with flows of £451m. Funds overall saw inflows of £950m in June, although excluding MMFs this falls to outflows of £2.81bn. It was another good month for index-tracking funds, as long-term active funds shed £3.58bn (compared to outflows of £2bn in May), while their passive equivalents attracted £771m (down from £3.37bn in May). In our last report, we observed that the global bond selloff late in the month hadn’t fed through into bond fund flows, as these netted £2.28bn. As expected, that’s no longer the case, with bonds overall shedding £2.11bn, with outflows of £3.45bn from active strategies and inflows of £1.33bn into passives. Detlef Glow Eve Maddock-Jones Claire Owens Kevin Addison https://lnkd.in/eEyYSKKV

The bad news about the historic bond bear market is that fixed income investors were forced to deal with large losses in certain areas of the bond market. The good news is the rising rates that caused the bear market in bonds mean yields are in a much better place than they've been for the past 10-15 years.

Funds overall took £1.87bn, although excluding MMFs this rises to £3.43bn. It was another enormously positive month for bonds, with inflows of £3.58bn—of which, active strategies took £20m—a further encroachment of trackers into the fixed income world. Bond funds have netted £11.14bn over 12 months, and passive bonds have taken all this and more, at £20.38bn. Over the month, bonds took £2.1bn. This breaks down to £1.72bn passive and £374m active, as fixed interest investors’ preference for index-tracking funds continues. Equities saw inflows of £922m for passive funds and outflows of £1.97bn for active, netting out at £1.05bn of redemptions. While MMFs saw the strongest positive flows, mixed asset funds saw inflows of £1.04bn, reversing March’s outflows of £709m; while alternatives netted £119m; and commodities, £39m. Meanwhile, real estate shed £293m. Hari Patel, Adam Vaites, Al McMutrie (He/His/Him), Detlef Glow https://lnkd.in/eDd5nHzc

Remember, the first rule of bond investing is: When interest rates go down, the value of bonds go up. High-yield environments like this one historically have translated into higher returns down the road for bond investors. Knowing this, however, doesn't make waiting for interest rates to go down any easier. Knowing is one thing, seeing is another. From here, we think the longer-term outlook for bonds is very attractive.

I know you must get too many of the "year ahead" outlooks.. 👀 ... and many say the same (slightly vague) things. BUT... as in seeking opportunities, it's worth checking the detail. One of my favourites is from Stella Ma, CFA, our Global HY manager on p11: "The global high yield (HY) market has been changing for the better as its overall credit quality has improved over the past decade. Currently, 53 percent of bonds in the US HY index and 70 percent of those in the EUR HY index are BB rated, a meaningful improvement from the 2007 levels where only 38 percent of Developed Market HY bonds were BB rated. Global HY spreads are relatively tight on an historical basis, but looking at the spread time series for the asset class and concluding that it is expensive would ignore its ongoing quality improvement. Some BB-rated companies were previously investment grade, which means they tend to have a full bond curve with meaningful exposure to the long end. This characteristic differs from “typical” high yield companies, which generally issue callable bonds with maturities up to 10 years. This provides additional relative value trading opportunities for active investors like us. Year to date, the US Treasury market has experienced high volatility, oscillating in a 130 basis point range, while volatility in the overall credit market has been low. This rate volatility (combined with a larger number of fallen angels with well-developed bond curves) has created dislocations and opportunities in the BB part of the high yield market." Read the rest of p11 for a trade example extracting relative value from a longer dated bond. Read Fixed Income Quarterly to discover how risk-minded, active investors – who can adjust to unpredictable terrain – may find blue sky days ahead: https://bit.ly/49v3hQ6 #yield #bonds #fixedincome #2025 #outlook #credit

For a significant period, low interest rates challenged bond yields, forcing investors to venture beyond government bonds for higher returns or extend their maturity risks. But with the recent shift in interest rates, new possibilities have emerged in the bond market. Discover three key reasons why investors should explore bonds: https://bit.ly/3UEBHdr

After a false dawn last year, 2024 has finally proved to be the 'year of the bond' as a record $600 billion+ has flowed into global fixed income funds. Investors have raced to lock in the high yields on offer on corporate and government debt as central banks lower interest rates, and have shown a clear preference for passive exchange-traded funds that can be traded throughout the day. Data from EPFR shows that $617 billion had flowed into developed and emerging market bond funds by the middle of December. That tops 2021's $500 billion of inflows and puts 2024 on track to be a record year, EPFR said. "The story is income," said Vasiliki Pachatouridi, head of EMEA iShares fixed income strategy at BlackRock. "We are seeing the income being put back into fixed income. We haven't seen these levels of yields in almost 20 years." Largely passive exchange-traded funds were on track for a record year with $350 billion of inflows by the end of November, according to Morningstar Direct data. PIMCO, traditionally known for its active management, has also had a strong year. It has drawn around $46 billion into its bond funds, according to Morningstar estimates, after shedding some $80 billion in 2022. https://lnkd.in/eUpBgNgn

“With the expectation of rate cuts, why not just buy long-term bonds?” The answer lies in the forward-looking nature of the yield curve and your reason for investing in bonds. If your bond portfolio is supposed to provide stability and protection of capital then speculating on interest rate moves risks adding unnecessary volatility and risk. In our latest Knowledge Center article, we delve into the intricacies of the yield curve and its role in bond investing. Understanding the yield curve is essential for investors, as it not only reflects current interest rates across different maturities but also provides insights into future expectations. https://lnkd.in/gBq-wzKg

In our latest quarterly publication, Fixed Income Boutique express some concerns: #bondmarkets appear complacent despite uncertainty around geopolitics, US #inflation, and the path of rates, and narrowing credit spreads suggest that riskier elements offer less value than their less risky counterparts. The team tackles these issues, which, in turn, underpin many of their optimistic views for active fixed income investing in 2025. Read the report for easy-to-digest insights into the fixed income asset class:

11 consecutive rate hikes later, expectations of an interest rate cut earlier this year remain unmet. The increase in bond yields, while being attractive, needs to be weighed against the impact of higher interest rates on businesses for investors looking for a stable income from bonds. Neuberger Berman's fixed income strategy focuses on providing diversification and resilience with a flexible, data-driven approach, one that is beyond predicting interest rates. Find out more here: https://lnkd.in/gR85RXnn #Endowus #InvestBetter #Bonds #FixedIncome Investment involves risk. Past performance is not an indicator nor a guarantee for future performance. Projected performance is not guaranteed. Please refer to our full disclaimer at https://sg.endow.us/mas. This advertisement has not been reviewed by the Monetary Authority of Singapore.