Despite the unfortunate month of October for fixed income securities, Bond investment funds, particularly those investing in the highest quality debt, continued to raise funds. Last week was the eleventh consecutive week of inflows into investment-grade debt funds, according to data released by BofA on Monday. The bank’s analysts point out that vehicles positioned on quality debt “only recorded net outflows for three weeks over the whole of 2024, and for very modest volumes”, which underlines “the strong demand for credit. Last week, these products raised 3.343 million dollars (approximately 3.060 million euros), and in the first ten months of 2024, almost 140.000 million dollars (in euros, approximately 128.000 million euros) . All these data refer to funds domiciled in Europe. Oliver Eichmann (DWS): “In the bond sector, there is now no sector that we should avoid for macroeconomic reasons.”
Rate cuts initiated by central banks on both sides of the Atlantic are boosting the price of bonds, which have therefore experienced a certain decline in recent months. rally from which bond portfolios benefited. However, The recently ended month of October was very complicated for this asset: The Bloomberg Global Aggregate index (which reflects the price behavior of a basket of global debt) fell 3.4%. This is its worst month since September 2022. The main reason for this decline is disappointment over the slowing pace of rate cuts: the market went from discounting 75 basis point cuts in the United States in September until the end of the year, to provide only one, for 25 points; and in Europe, from anticipating reductions of between 50 and 75 points, to predicting only a reduction of 25 points.
Despite this, as BofA analysts explain: “In a scenario of high expectations that the European Central Bank will cut deposit rates well below 200 basis points in 2025, we see that bond research quality persists. IG Funds Flow [grado de inversión] have been particularly strong so far this yearregardless of variations in credit market spreads. We do not expect any change towards the end of 2024 amid falling rates. without risk will continue to encourage bond investors to turn to investment grade corporate credit. » Against a backdrop of increased risks of economic slowdown next year, “and if the risks of lower customs duties materialize in commercial bonds”, the bank’s experts consider investment grade commercial bonds obligations “are perceived as a relatively safe haven by investors.” At the same time, they estimate that flows towards high yield (high yield debt, with higher default risk) will slow down due to these macroeconomic headwinds. What to do with the US bond, halfway between its best and worst time of the year.
