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Why investors’ demand for investment-grade bonds stayed strong

Chanderlekha Nayar

Why demand is rising for Treasuries and investment-grade bonds (Part 4 of 5)

(Continued from Part 3)

Five weeks of continuous fund flows

Last week, investment-grade corporate bonds (LQD) posted an inflow of $2.4 billion—$500 million up from the previous week’s $1.9 billion inflow.

Fund flows are a great way to assess investors’ demand in the market. Demand for investment-grade bonds was consistent throughout the year, with mid-week ended February 14, 2014, recording the highest inflow for the year, at $3.4 billion. Higher demand was due to strong fundamentals posted over a few weeks. Month-end fund flows totaled $9.9 billion.

Investment-grade corporate bonds’ tradable equivalents, such as the iSharesIBoxx $ Investment Grade Corporate Bond Fund (LQD), posted an $8.5 million inflow last week compared to an outflow of $11.8 million the previous week. The previous week’s outflow was triggered by several economic data misses, mainly due to harsh weather conditions and some stocks missing earnings estimates. LQD seeks investment results that correspond to the price and yield performance, before fees and expenses, of the corporate bond market, as defined by the iBoxx $ Liquid Investment Grade Index. One-month fund flows for the ETF stand at $74.7 million.

Please read on to the next part of this series to learn the outlook for U.S. Treasuries and investment-grade corporate bonds.

Continue to Part 5

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