Investors pulled more than $18B from from bond mutual funds and ETFs in the one week following last November's election - the largest one-week exit in more than three years. Over the next five weeks, they yanked an additional $22B.
At issue was the idea that better economic growth - and alongside, perkier inflation - were on the way.
It turned out to be a temporary blip, write Ben Eisen, Chris Dieterich, and Sam Goldfarb in the WSJ. More than $112B has been pumped back into fixed-income funds since January 1, and the benchmark 10-year Treasury yield touched 2.28% on Friday, its lowest level since shortly after the election.
Emerging market companies and governments have been happy to oblige, selling $178.5B of dollar-denominated debt in Q1, the highest quarterly amount ever.
U.S. corporates were happy to oblige as well, with high-grade credits selling a record $414.5B of paper in Q1. Junk-rated issuers sold $178.5B, double the amount in Q1 one year ago.
Name your excuse, but the Journal writers suggest the strong appetite for bonds shows investors unable to shake years-old assumptions about an economy able to do little more than muddle along.
"The old trade has worked really well, so you need overwhelming evidence before people will abandon something that has worked,” says Mohamed El-Erian, who helped coin the term the "new normal," to describe lame post-crisis economic growth. Bond buyers beware ... El-Erian says the that period is coming to an end.