THE GREAT ROTATION: Treasury Bond Funds Just Had Their Worst Week Ever

In the week ended August 7, investors redeemed $US4.0 billion from Treasury bond funds — equal to 1.3% of assets under management — marking the worst week of outflows on record for the asset class.

“Great Rotation continues as weekly flows show record redemptions ($US4bn) from Govt/Tsy funds vs robust inflows ($US10bn) to Developed Market equities,” says BofA Merrill Lynch chief investment strategist Michael Hartnett.

Also of note were outflows from BRICs equity funds, which were all the largest on record this past week — Brazil funds lost 1.8% of assets under management, Russia funds lost 0.8%, India funds lost 0.4%, and China funds lost 0.1%.

Below is a complete breakdown of this week’s fund flow data, via Hartnett:

Asset Class Flows

: $US9.6bn inflows ($US6.7bn via ETFs) (6 straight weeks)

: $US2.2bn outflows (largest outflows in 4 weeks)

Precious metals
: $US0.6bn outflows (record-extending 26 straight weeks)

Equity Flows

Strong $US1.8bn inflows to Europe (6 straight weeks)

$US5.7bn inflows to US (6 straight weeks) ($US4.2bn via ETFs)

$US0.7bn inflows to Japan (inflows in 28 out of past 29 weeks)

$US0.7bn outflows from EM equity funds; BRICs all record outflows

Fixed Income Flows

$US4.0bn outflows from Govt/Tsy (largest on record in absolute terms); caveat is that outflows from IEI (iShares 3-7y Treasury Bond ETF) accounted for half the redemptions

17 straight weeks out of TIPS ($US0.4bn)

11 straight weeks out of Munis ($US0.9bn)

11 straight weeks out of EM debt ($US0.4bn); but pace of outflows slowing

59 straight weeks of inflows to leveraged loan funds ($US2.0bn)

$US1.3bn inflows to HY bond
funds ($US12bn inflows over past 6 weeks)

3 straight weeks of small inflows to IG bond
funds ($US0.4bn)

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