Despite Steepening Yield Curve, Investors Embrace Bond Funds In April

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Includes: DUST, DWT, EFA, EMB, GLD, IEFA, IWM, SPY, TLT, XLF
by: Tom Roseen
Summary

For the second straight month, mutual fund investors were net redeemers of fund assets, withdrawing $4.0 billion from the conventional funds business for April.

For the fourth month in a row, fixed income funds (+$41.9 billion for April) witnessed net inflows.

For the third consecutive month, investors were net redeemers of stock & mixed-asset funds (-$33.4 billion). Money market funds (-$12.5 billion) witnessed net outflows for the second month running.

For the third month in a row, APs were net purchasers of ETFs, injecting $31.8 billion for April. APs were net purchasers of stock & mixed-asset ETFs (+$23.4 billion) and net purchasers of fixed income ETFs (+$8.4 billion).

Year to date, APs injected more net new money into bond ETFs (+$42.3 billion) than into stock & mixed-asset ETFs (+$35.2 billion).

Photo Source: Andy Wong/Pool via REUTERS. Chinese Vice Premier Liu He, right, poses with U.S. Treasury Secretary Steven Mnuchin, center, and U.S. Trade Representative Robert Lighthizer, left, before they proceed to their meeting at the Diaoyutai State Guesthouse in Beijing, Wednesday, May 1, 2019.

For the second consecutive month, investors were net redeemers of mutual fund assets, withdrawing $4.0 billion from the conventional funds business (excluding ETFs, which are reviewed in the section below) for April. Investors remained upbeat ahead of the Q1 earnings season and optimistic that the U.S. and China trade talks had made substantial progress during the month. Nonetheless, for the third month in a row, stock & mixed-asset funds witnessed net outflows (-$33.4 billion) for April. Despite the Treasury yield curve steepening at the long-end of the curve for April, the fixed income funds macro-group witnessed net inflows for the fourth month in a row, taking in $41.9 billion (their largest monthly net inflows since January 2018). And for the second month running, money market funds (-$12.5 billion) witnessed net outflows.

For the third month in a row, ETFs overall witnessed net inflows, taking in $31.8 billion for April. Authorized participants (APs, those investors who actually create and redeem ETF shares) were net purchasers of stock & mixed-asset ETFs for the third month running, adding $23.4 billion to equity ETF coffers. And for the sixth straight month, they were net purchasers of bond ETFs—injecting $8.4 billion for April. APs were net sellers of one of the five equity-based ETF macro-classifications—Mixed-Asset ETFs (-$28 million)—while being net purchasers of USDE ETFs (+$17.7 billion), World Equity ETFs (+$5.6 billion), Sector Equity ETFs (+$90 million), and Alternatives ETFs (+$72 million). In this segment, I highlight the April fund-flows results for both types of investment vehicles.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.