Investors Flip Flop on Bond Funds

Kevin McDevitt, CFA
Note: This is an excerpt from the Morningstar Direct U.S. Asset Flows Commentary for February 2019. The full report can be downloaded here.

Long-term flows in February 2019 were a strong $53.5 billion, their best month since January 2018. Money market funds took in a robust $41.3 billion. For the first two months of 2019, long-term flows were $92.7 billion, marking a strong start to 2019. Trailing-12-month inflows were $117.4 billion, just $24.7 billion more.

However, demand was largely limited to taxable-bond and municipal-bond funds, which brought in $37.3 billion and $11.2 billion, respectively. It was the latter's greatest haul since September 2009. With the Fed signaling a slowdown in rate increases, bond investors have decided it's safe to go back into the water. That renewed confidence showed in February's most popular taxable-bond categories, intermediate-term bond and high-yield bond, which collected $15.5 billion and $5.6 billion, respectively. Multisector bond fund PIMCO Income's (PIMIX) flows reflected this trend. It took in the most money of any actively managed fund in February with $3.2 billion, which followed $2.0 billion in January inflows.

Kevin McDevitt, CFA does not own shares in any of the securities mentioned above. Find out about Morningstar's editorial policies.