Investors pull out of bond funds amid fears QE will end

CalculatingFears that the United States Federal Reserve will end its quantitative easing programme by reducing its bond purchases prompted the highest weekly outflow from bond funds on record. Some $12.5 billion (€9.5 billion) flowed out of bond funds tracked by US data provider EPFR Global in the week ending June 5, including $6 billion from high-yield bond funds. However, economists say the latest US employment report, which shows moderate but not strong growth of 175,000 payrolls in May, suggests the Fed will continue its stimulus measures for some time yet — providing some reassurance to the markets. Schroders' chief economist, Keith Wade, says the current data points to an economy achieving modest growth, but not making inroads into unemployment. The Fed will need to see regular payroll gains of 200,000 a month before it decides to start tapering bond purchases, he says. The latest employment report “strengthens our conviction that we will have to wait until the second quarter of next year before the Fed starts to take its foot off the gas”, adds Wade. Bond investors appear nervous because the end of the Fed's bond-buying policy is expected to cause bond yields to rise, a worrying prospect given that yields are at very low levels. “Bond markets are extra sensitive to the prospect of tapering monetary stimulus, because investors naturally have a much lower tolerance for higher yields at these ultra low levels,” says Ian Spreadbury, manager of the Fidelity MoneyBuilder Income and Fidelity Strategic Bond funds. Spreadbury says the recent moves in the bond market highlight a lack of hiding places for investors seeking to avoid volatility. ©2013 funds europe

Executive Interviews

INTERVIEW: Put your money where your mouth is

Jun 10, 2016

At Kempen Capital Management, they believe portfolio managers should invest in their own funds. David Stevenson talks to Lars Dijkstra, CIO of the €42 billion manager.

EXECUTIVE INTERVIEW: ‘Volatility is the name of the game’

May 13, 2016

Axa Investment Managers chief executive officer, Andrea Rossi, talks to David Stevenson about bringing all his firm’s subsidiaries under one name and the opportunities that a difficult market...


ROUNDTABLE: Beyond the hype

Oct 13, 2016

The use of smart beta investing continues to grow. Our panel, made up of both providers and users, discusses what the strategy actually means, how it should be used and the kind of pitfalls that may arise when using this innovative investment technique.

MIFID II ROUNDTABLE: Following the direction of travel

Sep 07, 2016

Fund management firms Aberdeen and HSBC Global meet with specialist providers to speak about how the industry is evolving towards MiFID II.