Monthly Fund Flows – Another Month of Huge Outflows for Bonds

We have chronicled the pain in the bond market many times this year, most often in our monthly Total Return Review. Simply put, the bond market has never seen a worse start to a year since total return data began being collected in the 1970s.

Since flows generally tend to follow returns most of the time, it should come as no surprise that bond mutual funds and ETFs saw a fifth straight month of outflows in May. As the chart below shows, $52 billion of flows exited bond funds. This marks the third largest monthly outflow since at least 2002. This also comes on the heels of April’s outflows that ranked as the fourth largest on record. Only March 2020 and June 2013 saw larger outflows.

Interestingly, this third largest outflow from bond funds comes despite government bonds seeing their second largest inflow on record. As the chart below shows, government bonds have seen steady inflows almost every month since 2013.

The next few charts show some (but not all) of the other categories that make up ‘bond funds’. Most of the overall outflows came from corporates, but high yield and muni funds also saw outflows.

On a more granular level, bond mutual funds have now seen outflows for 19 straight weeks. With data going back to 2006, this is easily the longest consecutive streak of weekly outflows. The outflows in 2020 were more pronounced and quickly bounced back, but the past 19 weeks of mutual fund outflows are now approaching the outflows seen as the pandemic began ($287B in March/April 2020 vs. $254B since December 2021).

General Overview:

The table below shows the combined flows and assets of the major categories of mutual funds and ETFs.

The chart below shows the combined flows and assets of all long-term mutual funds and ETFs.

Long-term funds can be broken down into equity funds, bond funds and hybrid funds. Each is shown below.