Bond fund outflows reach new highs as QE doubts persist

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Bond funds across the globe saw outflows reach a new record high last week as investors continued to fret over the future pace of the US’ quantitative easing programme.

Figures from EPFR Global show investors worldwide pulled a collective $14.45bn (£9.2bn) from fixed-income mandates in the week ending 12 June, with redemptions concentrated in high yield, intermediate term and municipal bond funds.

Mortgage backed and long term corporate funds also witnessed “significant outflows” last week.

“Going into mid-June EPFR Global-tracked bond funds set a new outflow record for the second week running as fears that US monetary policy will tighten in the second half of the year prompted more investors to head for the exits,” the fund flow data provider says.

The Fed’s programme has been credited with helping to keep markets buoyant since the financial crisis. Investor sentiment took a hit in late May when Fed chairman Bernanke that the central bank may start to taper its $85bn-a-month bond-buying scheme “in the next few meetings” if the country’s labour market continues to strengthen.

EPFR Global’s figures also show that equity funds suffered $8.5bn in redemptions during the week ending 12 June. Outflows from emerging market equity funds, as well as emerging market debt funds, reached their highest since the third quarter of 2011 with combined redemptions of more than $8bn.

Chinese, Swiss, Brazilian and Russian equity funds saw fresh outflows last week while the amount of money being pulled from Turkish equity funds reached its highest since the first quarter of 2011.

However, some areas managed to attract new money. Flows going into German equity funds hit a 51-week high and Japanese equity and Chinese bond portfolios were able to extend their inflow streak for another week.