Investors injected a record $600 billion into investment funds. global bonds this year, taking advantage of some of the highest returns in decades and ahead of an uncertain 2025. Falling inflation eventually allowed central banks to reduce interest rates, prompting investors to lock in the relatively high yields available and finally cementing what is now the “year of the bond” after $250 billion left fixed income funds in 2022.
“The story is the income,” said Vasiliki Pachatouridi, head of fixed income strategy at BlackRock’s iShares EMEA. “We see income returning to fixed income. “We have not seen these levels of performance in almost 20 years.” Bond yields tend to fall and prices rise when central banks reduce short-term borrowing costs, Reuters quoted him as saying.
Although yields on the ICE BofA Global Bond Index (.MERGBMI) are moderate, around 2% this year, the yield offered exceeded 4.5% at the end of last year, the highest since 2008.
By mid-December, $617 billion had flowed into developed and emerging market bond funds, according to financial data provider EPFR, well above the $500 billion in 2021 and putting 2024 on track to be a record.
Global Bonds vs Stocks
Stocks, for their part, attracted $670 billion in flows, while indices in the US and Europe reach new highs. Cash-equivalent money market funds, which offer high returns and low risk, They have had the best performance, with more than $1 billion in entries.
Corporate bonds, which offer higher yields than equivalent government debt, have been particularly popular, rising as companies grapple with rising central bank interest rates. The yield on the ICE BofA Global Corporate Bond Index (.MERG0BC) fell to its lowest level against risk-free government debt since before the 2007 financial crisis.
Investors this year showed a clear preference for passive exchange-traded funds (ETFs), which are on track to have a record year with $350 billion in flows through the end of November, according to data from Morningstar Direct.
The two biggest passive fund players, BlackRock and Vanguard, have reaped the benefits. BlackRock’s iShares ETF business attracted $111 billion in flows between January and the end of October, according to Morningstar Direct estimates, while Vanguard received about $120 billion, the vast majority of which went to its ETF business. passive indices.
A number of factors could cause flows to slow in 2025. President-elect Donald Trump’s tax cut and deregulation agenda has caused a rise in U.S. stocks and a boom in flows into stocks, limiting the attractiveness of bonds. Data from EPFR and TD Securities show that $117 billion flowed into US stock funds. In the four weeks after Trump’s victory on November 5, more than four times the $27 billion that flowed into global bonds.
Source: Ambito
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